Kenvue Inc. (KVUE)

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Company Overview

At Kenvue, our purpose is to realize the extraordinary power of everyday care. As a global leader at the intersection of healthcare and consumer goods, we are the world’s largest pure-play consumer health company by revenue with $15.5 billion in Net sales in the fiscal year 2024. By combining the power of science with meaningful human insights and our digital strategy, we empower consumers to live healthier lives every day. Built on more than a century of heritage and trusted by generations, our differentiated portfolio of iconic brands—including Tylenol®, Neutrogena®, Listerine®, Johnson’s®, BAND-AID® Brand, Aveeno®, Zyrtec®, and Nicorette®—is backed by science and recommended by healthcare professionals, which further reinforces our consumers’ connections to our brands.

Our portfolio includes Self Care, Skin Health and Beauty, and Essential Health products, allowing us to connect with consumers globally—in their daily rituals and the moments that matter most.

Our global scale and the breadth of our brand portfolio are complemented by our well-developed capabilities and accelerated through our digital strategy, allowing us to dynamically capitalize on and respond to current trends impacting our categories and geographic markets.

With a sole focus on consumer health, our marketing organization operates efficiently by leveraging our precision marketing, e-commerce, and broader digital capabilities to develop unique consumer insights and further enhance the relevance of our brands. Similarly, our research and development organization combines these consumer insights with deep, multi-disciplinary scientific expertise, and engagement with healthcare professionals, to drive innovative new products, solutions, and experiences centered around consumer health.

Our Business Segments

We operate our business through the following three reportable business segments:

•Self Care. Our Self Care product categories include: Pain Care; Cough, Cold, and Allergy; and Other Self Care (Digestive Health, Smoking Cessation, Eye Care, and Other). Major brands in the segment include Tylenol®, Motrin®, Nicorette®, Benadryl®, Zyrtec®, Zarbee’s®, ORSLTM, Rhinocort®, and Calpol®.

•Skin Health and Beauty. Our Skin Health and Beauty product categories include: Face and Body Care; and Hair, Sun, and Other. Major brands in the segment include Neutrogena®, Aveeno®, Dr.Ci:Labo®, OGX®, Le Petit Marseillais®, Lubriderm®, and Rogaine®.

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•Essential Health. Our Essential Health product categories include: Oral Care; Baby Care; and Other Essential Health (Women’s Health, Wound Care, and Other). Major brands in the segment include Listerine®, Johnson’s®, BAND-AID® Brand, Stayfree®, o.b.® tampons, Carefree®, and Desitin®.

For additional information about our three reportable business segments, see “—Key Factors Affecting Our Results—Our Brands and Product Portfolio” and Note 18, “Segments of Business and Geographic Areas,” to the Consolidated Financial Statements included herein.

Separation from J&J

In November 2021, J&J, our former parent company, announced its intention to separate its Consumer Health segment into an independent publicly traded company. Kenvue was incorporated in Delaware in February 2022, as a wholly owned subsidiary of J&J, to serve as the ultimate parent company of J&J’s Consumer Health Business. In April 2023, J&J completed the transfer of substantially all of the assets and liabilities of the Consumer Health Business to us and our subsidiaries. In May 2023, we completed an initial public offering of approximately 10.4% of our outstanding common stock and began trading on the NYSE under the ticker symbol “KVUE.” Following the Kenvue IPO, J&J owned approximately 89.6% of our outstanding common stock. In July 2023, J&J announced an exchange offer under which its shareholders could exchange shares of J&J common stock for shares of our common stock owned by J&J. In August 2023, J&J completed the Exchange Offer and exchanged shares representing approximately 80.1% of our common stock, completing the Separation from J&J and transition to being a fully independent public company. In May 2024, J&J completed an additional exchange offer through which J&J exchanged indebtedness of J&J for shares of our common stock owned by J&J. Following the completion of the Debt for Equity Exchange, J&J no longer owned any shares of our common stock.

See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Description of the Company and Business Segments,” to the Consolidated Financial Statements for additional information.

We are incurring certain non-recurring separation-related costs in connection with our establishment as a standalone public company (the “Separation-related costs”). We expect the Separation-related costs will continue through approximately the first half of fiscal year 2025. For additional information about the Separation, see Note 1, “Description of the Company and Summary of Significant Accounting Policies,” and Note 12, “Relationship with J&J,” to the Consolidated Financial Statements included herein.

Relationship with J&J

We entered into the Separation Agreement and various other agreements with J&J for the purpose of effecting the Separation. These agreements provide a framework for our relationship with J&J and govern various interim and ongoing relationships between us and J&J that follow the completion of the Kenvue IPO. See Note 12, “Relationship with J&J,” to the Consolidated Financial Statements included herein for additional information on these agreements.

Kenvue Global Headquarters

On April 20, 2023, we entered into a long-term lease for a newly renovated global and North America corporate headquarters building and a newly constructed research and development building in Summit, New Jersey. We expect to officially open our new global and North America corporate headquarters in March 2025. The relocation to our new campus from multiple U.S.- based locations will continue through 2026 when the new research and development building is expected to be complete. When construction is completed, the campus will encompass approximately 290,000 square feet. The Global and North America Headquarters Lease collectively includes the lease associated with the global and North America corporate headquarters building, the lease associated with the land where the research and development building is under construction, and the lease associated with land to be used for amenities.

On February 21, 2024, we listed our interim corporate headquarters in Skillman, New Jersey for sale, which met the criteria to be classified as held for sale at that date. For the fiscal three months ended March 31, 2024, an impairment charge of $68 million was recorded on the held for sale asset associated with the interim corporate headquarters in Skillman. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Assets Held for Sale,” to the Consolidated Financial Statements included herein for more information.

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Key Factors Affecting Our Results

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part I, Item 1A, “Risk Factors,” of this Annual Report on Form 10-K.

Our Brands and Product Portfolio

We have a world-class, global portfolio of iconic and modern brands, and for over 135 years, we have been making and investing in consumer products that are trusted by generations of consumers. Our business is balanced and resilient with leading brands across categories and geographic markets. Our brands are widely recognized and represent a combination of global powerhouses and regional brands, many of which hold leading positions in their respective categories. Our brands are built for moments that uniquely matter; these moments of care create an emotional connection to our products that creates deep bonds between consumers and our brands.

Consumers, customers, and third-party partners value and trust the reputation, reliability, and status of our brands and the quality, performance, and functionality of our products, and we believe there are significant opportunities to further increase our category and brand penetration by continuing to deepen our brand relevance and salience across our portfolio, continually earning a place for our products in consumers’ hearts and homes.

Shifting Consumer Preferences

Everyday care has never been a more essential part of the consumer health journey. Globally, preferences and expectations for consumer health products continue to evolve, with a heightened focus on preventative care and science-backed solutions. Consumers are also shifting the paradigm of beauty towards health. Other recent trends that have affected consumer preferences include an aging population, premiumization (where consumers switch their purchases to premium alternatives), a growing middle class in emerging markets, and the rise of digital ecosystems that create new opportunities for personalized health solutions. We expect these trends to continue and that consumers will continue to seek solutions that meet their health goals, creating growth opportunities across our product portfolio.

Innovation

We rely on science. We have always prioritized science as the core of how we provide care, and we remain committed to this approach. Our ability to quickly develop new products and technologies and to adapt and market our products on an ongoing basis to meet evolving consumer preferences is an essential component of our business strategy. Several of our products have a long history of life-enhancing, first-to-market innovations. In many situations, we have driven the innovation and clinical compendium of entire categories. By leveraging world-class research and development capabilities and a team of research and development professionals, we have a multi-disciplinary and differentiated approach to innovation.

Increased Competition

Our products are sold in a highly competitive global marketplace, which, in recent years, has experienced increased retail trade concentration, the emergence of retail buying alliances, the rapid growth of e-commerce, and the integration of traditional and digital operations at key customers. One of our customers accounted for approximately 12%, 12%, and 13% of total Net sales for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively. Our top 10 customers represented approximately 41%, 41%, and 42% of total Net sales for the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively. As a result of these trends, certain large-format customers have significant bargaining strength and represent a significant portion of our total Net sales.

Sourcing, Manufacturing, and Supply Chain Management

Our ability to meet the needs of our consumers and customers depends on the proper functioning of our manufacturing and supplier operations. Our manufacturing operations require the timely delivery of sufficient amounts of complex, high-quality components and materials. We have built our supply chain network to deploy resources across the globe where they are most needed. Our sourcing, manufacturing, and demand planning capabilities are continuously optimized to meet evolving market dynamics. Our extensive distribution network and sales organization enable us to establish strategic partnerships with key suppliers and retailers across multiple markets and channels, where we further leverage our scale to drive flexible

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manufacturing capacity and supply chain optimization. We believe this approach builds and supports our resilience across economic cycles and allows us to prioritize or expand our geographic focus based on our strategic priorities.

Restructuring

As part of our continued transformation to a fit-for-purpose consumer company, during the fiscal year 2024, we began strategic initiatives intended to enhance organizational efficiencies and better position us for future growth (“Our Vue Forward”). To further Our Vue Forward, on May 6, 2024, our Board approved a multi-year initiative (the “2024 Multi-Year Restructuring Initiative”) to build on our strengths, improve our underlying information technology infrastructure, and optimize our cost structure by rebalancing resources to better position us for future growth. The 2024 Multi-Year Restructuring Initiative primarily includes global workforce reductions, changes in management structure, and the transition to centralized shared-service functions in lower-cost locations. See Note 19, “Restructuring Expenses and Operating Model Optimization Initiatives,” to the Consolidated Financial Statements included herein for further information.

Supply Chain Optimization Initiatives

Since 2019, we have taken significant steps to meet consumer demand and mitigate supply chain constraints. We have redesigned our manufacturing and distribution network, optimizing both in-house and external manufacturing and distribution footprints to improve lead time and reliability across the globe. We selectively invested in specific technologies and expanded our capacity in different geographic markets with the intent to increase competitiveness by improving cost, speed, compliance, and customer service. As a result, our historical results of operations reflect savings delivered through these end-to-end supply chain optimization initiatives.

Macroeconomic Trends

Macroeconomic factors affect consumer spending patterns and thereby our results of operations. These factors include general economic conditions, inflation, consumer confidence, employment rates, business conditions, the availability of credit, interest rates, tax rates, and fuel and energy costs. Factors that impact consumer discretionary spending, which remain volatile globally, continue to create a complex and challenging retail environment for us and our third-party partners. We intend to continue to evaluate and adjust our operating strategies and cost management opportunities to help mitigate any impacts on our results of operations resulting from broader macroeconomic conditions and policy changes, while remaining focused on the long-term growth of our business.

Economic challenges, including the impact from acts of war, military actions, terrorist attacks, or civil unrest, may continue to cause economic uncertainty and volatility. The impact of these issues may adversely affect prevailing economic conditions and our business, results of operations, or financial condition.

Russia-Ukraine War

Although the long-term implications of the Russia-Ukraine War are difficult to predict at this time, the financial impact of the conflict during the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023 was not significant to our results of operations. For the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, our Ukrainian business represented 0.2%, 0.2%, and 0.1% of our Net sales, respectively. As of both December 29, 2024 and December 31, 2023, our Ukrainian business represented 0.1% of our assets. For the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023, our Russian business represented 1.1%, 1.0%, and 1.4% of our Net sales, respectively. As of both December 29, 2024 and December 31, 2023, our Russian business represented 0.7% of our assets.

In the fiscal three months ended April 3, 2022, we announced our decision to suspend supply of all of our products into Russia other than our OTC medicines within our Self Care segment, which we continued to supply as patients rely on many of these products for healthcare purposes. Supply of the suspended products terminated during the fiscal three months ended July 3, 2022. We also suspended branded advertising, clinical trials, and additional investment in Russia. We will continue to monitor the geopolitical situation in Russia and evaluate our activities and future operations in Russia.

Foreign Currency Exposure

We report our consolidated financial results in U.S. dollars but have significant non-U.S. operations. A large portion of our business is conducted in currencies other than U.S. dollars, and generally the applicable local currency is our functional currency in that locality. As a result, we face foreign currency exposure on the translation into U.S. dollars of our results of

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operations in numerous jurisdictions. We manage the impact of foreign exchange rate translation and transaction exposures through operational means and the use of derivative financial instruments such as forward foreign exchange contracts and cross currency swap contracts. In addition, as we continue to expand our global operations, our exposure to foreign currency risk could become more significant, particularly if the U.S. dollar strengthens in the future.

Acquisitions and Divestitures

We continually assess and refine our portfolio through acquisitions of businesses as well as divestitures of assets that we do not believe are well integrated into our product portfolio and strategic direction. We believe our strong balance sheet will allow us to strategically make acquisitions and divestitures while maintaining our disciplined approach to capital allocation.

We did not complete any significant acquisitions or divestitures during the fiscal twelve months ended December 29, 2024, December 31, 2023, and January 1, 2023.

Legal Proceedings

We and/or certain of our subsidiaries are involved from time to time in various lawsuits and claims relating to product liability, labeling, marketing, advertising, pricing, intellectual property, commercial contracts, foreign exchange controls, antitrust and trade regulation, labor and employment, indemnification, data privacy and cybersecurity, environmental, health and safety, and tax matters, governmental investigations, and other legal proceedings that arise in the ordinary course of our business. See Note 17, “Commitments and Contingencies,” to the Consolidated Financial Statements included herein for additional information regarding our current legal proceedings.

A significant number of personal injury claims alleging that talc causes cancer were made against J&J and certain of its affiliates arising out of the use of body powders containing talc, primarily Johnson’s® Baby Powder. These personal injury suits were filed primarily in state and federal courts in the United States and in Canada.

Pursuant to the Separation Agreement, J&J has retained the Talc-Related Liabilities and, as a result, has agreed to indemnify us for the Talc-Related Liabilities in the United States and Canada and any costs associated with resolving such claims. We will, however, remain responsible for all liabilities on account of or relating to harm arising out of, based upon or resulting from, directly or indirectly, the presence of or exposure to talc or talc-containing products sold outside the United States or Canada.

Except for the Talc-Related Liabilities and certain other liabilities for which the Company was indemnified by J&J, the Company generally remains responsible for liabilities relating to, arising out of, or resulting from the past or current operation or conduct of the Company’s business.

Results of Operations

A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended December 29, 2024 and the fiscal twelve months ended December 31, 2023 is presented below. A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended December 31, 2023 and the fiscal twelve months ended January 1, 2023 can be found under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II., Item 7 of this Annual Report on Form 10-K for the fiscal twelve months ended December 31, 2023 filed on March 1, 2024 with the SEC (the “2023 Annual Report”).

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Fiscal Twelve Months Ended December 29, 2024 Compared with Fiscal Twelve Months Ended December 31, 2023

Our results for the fiscal twelve months ended December 29, 2024 and December 31, 2023 were as follows:

* Calculation not meaningful.

Net Sales

Net sales were $15.5 billion and $15.4 billion for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, an increase of $11 million, or 0.1%. Excluding the impact of unfavorable changes in foreign currency exchange rates of $219 million, or 1.4%, Organic sales (a non-GAAP financial measure as defined in “Segment Results—Organic Sales Change” below) growth was $230 million, or 1.5%. Organic sales growth was driven by favorable value realization (defined as price, including mix) of 2.7%, partially offset by volume-related decreases of 1.2%. The increase in year-over-year value realization was primarily due to carryover price increases from the prior fiscal year as well as new pricing actions, while the volume-related decrease was primarily driven by Skin Health and Beauty and Self Care. Organic sales growth was primarily driven by growth in Essential Health across all product categories, led by Oral Care, as well as growth in Self Care, partially offset by declines in Skin Health and Beauty due to volume-related decreases in the United States attributable to the carryover effects from prior fiscal year execution challenges and current fiscal year competitive pressures. For additional information about the Net sales of our three reportable business segments, see “—Segment Results” below.

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The following tables present a reconciliation of the change in U.S. GAAP Net sales to the change in Organic sales for the fiscal twelve months ended December 29, 2024 as compared to the fiscal twelve months ended December 31, 2023:

(1) Acquisitions and divestitures did not materially impact Net sales for the fiscal twelve months ended December 29, 2024 or December 31, 2023.

(2) Also referred to as value realization.

Cost of Sales

Cost of sales were $6.5 billion and $6.8 billion for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, a decrease of $305 million, or 4.5%. Gross profit margin expanded 200 basis points to 58.0% for the fiscal twelve months ended December 29, 2024 as compared to 56.0% for the fiscal twelve months ended December 31, 2023. Changes in both Cost of sales and gross profit margin were primarily due to gains attributable to the realization of benefits associated with our supply chain optimization initiatives. Gross profit margin also increased due to value realization.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were $6.3 billion and $6.1 billion for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, an increase of $188 million, or 3.1%. Selling, general, and administrative expenses as a percentage of Net sales increased 120 basis points to 41.0% for the fiscal twelve months ended December 29, 2024, as compared to 39.8% for the fiscal twelve months ended December 31, 2023, primarily attributable to higher expenses related to brand support, including advertising and healthcare professional engagement, as we increased our investment to further support sales across segments and geographies, and an additional quarter of incremental ongoing public company costs not incurred last year. These cost increases were partially offset by savings from Our Vue Forward and a $217 million decrease in Separation-related costs.

Restructuring Expenses

Restructuring expenses were $185 million for the fiscal twelve months ended December 29, 2024, driven by costs incurred under Our Vue Forward related to global workforce reductions, changes in management structure, and the transition to centralized shared-service functions in lower-cost locations, as we began strategic initiatives intended to enhance organizational efficiencies and better position Kenvue for future growth. This includes employee-related costs, information technology and project-related costs, and other implementation costs. See Note 19, “Restructuring Expenses and Operating Model Optimization Initiatives,” to the Consolidated Financial Statements included herein for additional information.

Impairment Charges

Impairment charges were $578 million for the fiscal twelve months ended December 29, 2024, which primarily included a non-cash charge of $488 million ($337 million after-tax) to adjust the carrying value of intangible assets and property, plant, and equipment related to the Dr.Ci:Labo® skin health business. The impairment was due primarily to revisions to internal forecasts for the business as a result of updates in our strategy to reach more consumers and appropriately address evolving market dynamics, including shifts in consumer sentiment in China as well as changing shopping patterns in the region. The increase also included the impact of a $68 million non-cash impairment charge related to our interim corporate headquarters in Skillman, New Jersey, which was classified as held for sale on February 21, 2024. Additionally, we recognized a non-cash impairment charge of $22 million related to certain software development assets. See Note 1, “Description of the Company and Summary

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of Significant Accounting Policies—Impairment of Long-Lived Assets,” to the Consolidated Financial Statements included herein for additional information.

Other Operating Expense (Income), Net

Other operating expense (income), net was $26 million and $(10) million for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, a change of $36 million. Expense for the fiscal twelve months ended December 29, 2024 was driven by the $59 million accounting impact of net economic benefit arrangements with J&J in connection with the Deferred Local Businesses (see Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein for additional information), partially offset by $34 million of royalty income. Income for the fiscal twelve months ended December 31, 2023 was driven by the prior period reversal of a $45 million contingent liability that was no longer considered to be probable, $35 million of royalty income, and a $9 million gain recognized on the sale of a manufacturing facility in Lancaster, Pennsylvania in the fiscal twelve months ended December 31, 2023, partially offset by the $28 million accounting impact of net economic benefit arrangements with J&J in connection with the Deferred Local Businesses, and $26 million of litigation expense. See Note 13, “Other Operating Expense (Income), Net and Other Expense, Net,” to the Consolidated Financial Statements included herein for additional information.

Other Expense, Net

Other expense, net was $48 million and $72 million for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, a decrease of $24 million. Expense for the fiscal twelve months ended December 29, 2024 was driven by $72 million in losses on investments, partially offset by a $21 million gain recognized on the release of tax indemnification reserves that were no longer considered to be probable. Expense for the fiscal twelve months ended December 31, 2023 was driven by $58 million in currency losses on transactions and $7 million in losses on investments. See Note 13, “Other Operating Expense (Income), Net and Other Expense, Net,” to the Consolidated Financial Statements included herein for additional information.

Interest Expense, Net

Interest expense, net was $378 million and $250 million for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, an increase of $128 million. The increase in expense was driven by an additional quarter of interest expense recognized on the Senior Notes and notes issued under the Commercial Paper Program not incurred last fiscal year, along with $33 million of interest income recognized in the fiscal three months ended July 2, 2023 in relation to the Facility Agreement (as defined in Note 5, “Borrowings—Facility Agreement,” to the Consolidated Financial Statements included herein) as well as interest income earned in the fiscal six months ended July 2, 2023 on debt proceeds in escrow. See Note 5, “Borrowings,” to the Consolidated Financial Statements included herein for additional information.

Provision For Taxes

Provision for taxes was $385 million and $526 million for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, a decrease of $141 million. The decrease in Provision for taxes was primarily due to lower year-to-date income in comparison to the prior fiscal period as a result of the Dr.Ci:Labo® skin health business impairment for the fiscal twelve months ended December 29, 2024 and the recording of a valuation allowance against a deferred tax asset related to future foreign tax benefits in the fiscal twelve months ended December 31, 2023. The decrease is offset by fewer releases of uncertain tax positions due to the expiration of certain statutes of limitations and reduced tax benefits derived from the Separation as compared to the fiscal twelve months ended December 31, 2023 as well as unfavorable return-to-provision adjustments and shortfall on stock-based compensation recorded during the fiscal twelve months ended December 29, 2024. In addition, the worldwide effective income tax rates for the fiscal twelve months ended December 29, 2024 and December 31, 2023 were 27.2% and 24.0%, respectively. See Note 14, “Income Taxes,” to the Consolidated Financial Statements included herein for additional information.

Segment Results

Segment profit is based on Operating income, excluding depreciation, amortization of intangible assets, Separation-related costs, restructuring and operating model optimization initiatives, impairment charges, the impact of the conversion of stock-based awards, issuance of Founder Shares (as defined below), Other operating expense (income), net, and unallocated general corporate administrative expenses (referred to herein as “Segment adjusted operating income”), as the Chief Operating Decision Maker (the “CODM) excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which include expenses related to treasury, legal operations, and certain other expenses, along with gains and losses related to

the overall management of our Company, are not allocated to the segments. In assessing segment performance and managing operations, the CODM does not review segment assets.

See Note 18, “Segments of Business and Geographic Areas,” to the Consolidated Financial Statements included herein for additional information.

A detailed discussion of the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal twelve months ended December 29, 2024 and the fiscal twelve months ended December 31, 2023 is presented below. A detailed discussion of the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal twelve months ended December 31, 2023 and the fiscal twelve months ended January 1, 2023 can be found under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II., Item 7 of our 2023 Annual Report.

Fiscal Twelve Months Ended December 29, 2024 Compared with Fiscal Twelve Months Ended December 31, 2023

The following tables presents Segment net sales and Segment adjusted operating income and the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal twelve months ended December 29, 2024 and December 31, 2023. During the fiscal twelve months ended December 29, 2024, we adopted ASU 2023-07, as described in more detail in Note 1, “Description of the Company and Summary of Significant Accounting Policies— Recently Adopted Accounting Standards,” to the Consolidated Financial Statements included herein. See Note 18, “Segments of Business and Geographic Areas,” to the Consolidated Financial Statements included herein for further details regarding Segment net sales and Segment adjusted operating income.

(1) The Company defines Segment adjusted cost of sales as Cost of sales adjusted for amortization of intangible assets, Separation-related costs, conversion of stock-based awards, Founder Shares, operating model optimization initiatives, and general corporate/unallocated expenses.

(2) Other segment expense items for each reportable segment include employee-related costs, brand support, shipping and handling costs, research and development costs, and certain other operating expenses (income).

(3) Depreciation includes the amortization of integration and development costs capitalized in connection with cloud computing arrangements.

(4) Separation-related costs includes depreciation expense on Separation-related assets for the fiscal twelve months ended December 29, 2024.

(5) Segment adjusted operating income excludes the impact of the conversion of stock-based awards that occurred on August 23, 2023 (see Note 11, “Stock-Based Compensation,” to the Consolidated Financial Statements included herein for additional information). The adjustment represents the net impact of the gain on reversal of previously recognized stock-based compensation expense, offset by stock-based compensation expense recognized in the fiscal twelve months ended December 29, 2024 and December 31, 2023 relating to employee services provided prior to the Separation.

(6) On August 25, 2023, our Compensation & Human Capital Committee approved equity grants to individuals employed by Kenvue as of October 2, 2023 (the “Founder Shares”). On October 2, 2023, the Founder Shares were granted to all Kenvue employees in the form of stock options and PSUs to executive officers and either stock options and PSUs or RSUs to non-executive individuals (see Note 11, “Stock-Based Compensation,” to the Consolidated Financial Statements included herein for additional information).

(1) Refer to the table above for the reconciliation of Segment adjusted operating income to Operating income and Income before taxes on the Consolidated Financial Statements.

Organic Sales Change

We define Organic sales, a non-GAAP financial measure, as Net sales excluding the impact of changes in foreign currency exchange rates and the impact of acquisitions and divestitures. We assess our Net sales performance by measuring the period-over-period change in Organic sales (previously referred to as “Organic growth”). Management believes reporting period-over-period changes in Organic sales provides investors with additional, supplemental information that is useful in assessing our results of operations by excluding the impact of certain items that we believe do not directly reflect our underlying operations.

The following tables present a reconciliation of the change in U.S. GAAP Net sales to the change in Organic sales for the fiscal twelve months ended December 29, 2024 as compared to the fiscal twelve months ended December 31, 2023:

(1) Acquisitions and divestitures did not materially impact Net sales for the fiscal twelve months ended December 29, 2024 or December 31, 2023.

(2) Also referred to as value realization.

Self Care Segment

Self Care Segment Net Sales

The Self Care Segment Net sales were $6.5 billion for both the fiscal twelve months ended December 29, 2024 and December 31, 2023. For the fiscal twelve months ended December 29, 2024, Net sales increased $76 million, or 1.2%, as compared to the fiscal twelve months ended December 31, 2023. Excluding the impact of unfavorable changes in foreign currency exchange rates of $44 million, or 0.7%, Organic sales growth was $120 million, or 1.9%. Organic sales growth was primarily driven by favorable value realization of 2.5% due to the performance in Smoking Cessation as a result of effective promotional strategies and product innovation, as well as Digestive Health and Allergy Care. Partially offsetting the favorable value realization, volume-related decreases reduced Organic sales by 0.6% driven by declines in Pain Care resulting from trade inventory fluctuations primarily in the United States as well as declines in pediatric products attributable to lower incidences of illnesses primarily in APAC and North America.

Self Care Segment Adjusted Operating Income

The Self Care Segment adjusted operating income decreased by $126 million, or 5.5%, to $2,173 million for the fiscal twelve months ended December 29, 2024 as compared to the fiscal twelve months ended December 31, 2023. The decrease was primarily driven by increased investment in our brands and volume-related Net sales decreases, partially offset by favorable value realization and the realization of benefits associated with our supply chain optimization initiatives.

Skin Health and Beauty Segment

Skin Health and Beauty Segment Net Sales

The Skin Health and Beauty Segment Net sales were $4.2 billion and $4.4 billion for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, a decrease of $138 million, or 3.2%. Excluding the impact of unfavorable changes in foreign currency exchange rates of $57 million, or 1.3%, Organic sales decline was $81 million, or 1.9%. The Organic sales decline was primarily driven by volume-related decreases of 3.5%, primarily in the United States attributable to the carryover effects from prior fiscal year execution challenges, as well as current fiscal year competitive pressures, coupled

with market softness in China primarily impacting the first half of the fiscal year, partially offset by growth primarily in EMEA and LATAM. Partially offsetting the volume-related decrease, favorable value realization increased Organic sales by 1.6%.

Skin Health and Beauty Segment Adjusted Operating Income

The Skin Health and Beauty Segment adjusted operating income decreased by $72 million, or 10.6%, to $607 million for the fiscal twelve months ended December 29, 2024 as compared to the fiscal twelve months ended December 31, 2023. The decrease was primarily driven by increased investment in our brands and volume-related Net sales decreases, partially offset by the realization of benefits associated with our supply chain optimization initiatives and favorable value realization.

Essential Health Segment

Essential Health Segment Net Sales

The Essential Health Segment Net sales were $4.7 billion and $4.6 billion for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, an increase of $73 million, or 1.6%. Excluding the impact of unfavorable changes in foreign currency exchange rates of $118 million, or 2.5%, Organic sales growth was $191 million, or 4.1%. Organic sales growth, primarily driven by favorable value realization of 3.9% across all product categories, was led by strong performance in Oral Care, attributable to product innovation and effective promotional strategies, and growth in Women’s Health.

Essential Health Segment Adjusted Operating Income

The Essential Health Segment adjusted operating income increased by $151 million, or 14.9%, to $1,162 million for the fiscal twelve months ended December 29, 2024 as compared to the fiscal twelve months ended December 31, 2023. The increase was primarily driven by favorable value realization and the realization of benefits associated with our supply chain optimization initiatives, partially offset by increased investment in our brands.

Liquidity and Capital Resources

Prior to April 4, 2023, our working capital requirements and capital expenditures were satisfied as part of J&J’s corporate-wide cash management and centralized funding programs, and a substantial portion of our cash was transferred to J&J. Cash and cash equivalents held by J&J at the corporate level were not specifically identifiable to us.

Effective April 4, 2023, upon completion of the Consumer Health Business Transfer (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies—Description of the Company and Business Segments,” to the Consolidated Financial Statements included herein), we no longer participate in J&J’s corporate-wide cash management and centralized funding programs.

Cash Flows

Summarized cash flow information for the fiscal twelve months ended December 29, 2024 and December 31, 2023 were as follows:

* Calculation not meaningful.

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A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended December 29, 2024 and the fiscal twelve months ended December 31, 2023 is presented below. A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended December 31, 2023 and the fiscal twelve months ended January 1, 2023 can be found under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II., Item 7 of our 2023 Annual Report.

Operating Activities

Net cash flows from operating activities were $1.8 billion and $3.2 billion for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, a decrease of $1,399 million. The decrease was primarily attributable to changes in working capital balances driven by a net decrease in Accounts payable and Accrued liabilities due to the timing of payments and an increase in Trade receivables due to the timing of sales and collections.

Investing Activities

Net cash flows used in investing activities were $425 million and $488 million for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, a decrease of $63 million. Net cash flows used in investing activities were primarily driven by purchases of property, plant, and equipment in both the fiscal twelve months ended December 29, 2024 and December 31, 2023, partially offset by proceeds from the sale of assets in the fiscal twelve months ended December 31, 2023.

Financing Activities

Net cash flows used in financing activities were $1.6 billion and $2.5 billion for the fiscal twelve months ended December 29, 2024 and December 31, 2023, respectively, a decrease of $962 million. Net cash flows used in financing activities for the fiscal twelve months ended December 29, 2024 were primarily driven by $1,552 million of dividends paid and $235 million of payments made to purchase treasury stock, partially offset by $157 million of net proceeds from the issuance of commercial paper under the Commercial Paper Program (as defined below). Net cash flows used in financing activities for the fiscal twelve months ended December 31, 2023 were primarily driven by $13.8 billion in distributions to J&J in connection with the Separation, $766 million of dividends paid, and Net transfers to J&J of $274 million, partially offset by approximately $7.7 billion of net proceeds from Senior Notes (as defined below), $4.2 billion of proceeds from the sale of common stock in connection with the Kenvue IPO, and $574 million of net proceeds from the issuance of commercial paper under the Commercial Paper Program. Net transfers to J&J were driven by cash pooling and general financing activities, indirect corporate cost allocations from J&J, and taxes deemed to be settled with J&J. For further details regarding Net transfers to J&J, see Note 12, “Relationship with J&J—Net Transfers to J&J,” to the Consolidated Financial Statements included herein.

Sources of Liquidity

Our primary sources of liquidity are cash on hand, which consisted of Cash and cash equivalents of $1.1 billion as of December 29, 2024, cash flows from operations, borrowing capacity under our Revolving Credit Facility (as defined below) of $4.0 billion, and authorized Commercial Paper Program issuance of $4.0 billion. As of December 29, 2024, we had no amounts outstanding under the Revolving Credit Facility and $797 million of outstanding balances under our Commercial Paper Program, net of a related discount of $3 million.

Our ability to fund our operating needs will depend on our ability to continue to generate positive cash flows from operations and on our ability to obtain debt financing on acceptable terms or to issue additional equity or equity-linked securities. Based upon our history of generating positive cash flows, we believe our existing cash and cash generated from operations will be sufficient to service our current obligations for at least the next 12 months.

Management believes that our cash balances and funds provided by operating activities, along with borrowing capacity and access to capital markets, taken as a whole, provide adequate liquidity to meet all of our current and long-term obligations when due, including third-party debt that we incurred in connection with the Separation, adequate liquidity to fund capital expenditures, and flexibility to meet investment opportunities that may arise. However, we cannot assure you that we will be able to obtain additional debt or equity financing on acceptable terms in the future.

Cash and cash equivalents decreased by $312 million during the fiscal twelve months ended December 29, 2024 to $1,070 million as of December 29, 2024, as compared to $1,382 million as of December 31, 2023. Cash and cash equivalents held by our foreign subsidiaries was $1,044 million and $1,336 million as of December 29, 2024 and December 31, 2023, respectively.

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Restructuring

As part of our continued transformation to a fit-for-purpose consumer company, during the fiscal year 2024, we began Our Vue Forward to enhance organizational efficiencies and better position Kenvue for future growth. To further Our Vue Forward, on May 6, 2024, our Board approved the 2024 Multi-Year Restructuring Initiative to build on our strengths, improve our underlying information technology infrastructure, and optimize our cost structure by rebalancing resources to better position us for future growth. The 2024 Multi-Year Restructuring Initiative is expected to result in pre-tax restructuring expenses and other charges totaling approximately $550 million. We planned to incur approximately $275 million in pre-tax restructuring expenses and other charges in each of fiscal year 2024 and fiscal year 2025. We incurred lower than expected spend in fiscal year 2024 due to the shift in timing of certain information technology and project-related costs to fiscal year 2025 and lower than expected employee-related costs relating to severance spend due to employee redeployment and voluntary exits. Over the life of the initiative, a majority of the pre-tax expenses and other charges are expected to be paid in cash. These charges are expected to be funded primarily through cash flows generated from operations. We began to realize savings resulting from the 2024 Multi-Year Restructuring Initiative in fiscal year 2024, and we expect to realize the full extent of annualized pre-tax gross cost savings of approximately $350 million beginning in fiscal year 2026. We expect to reinvest all or a portion of the benefits associated with the 2024 Multi-Year Restructuring Initiative in future growth opportunities, including immediate reinvestment behind advertising, product promotion, and healthcare professional engagement. Our estimates of the costs of the initiative and the expected benefits are preliminary estimates and are subject to a number of assumptions, including local law requirements in various jurisdictions. Actual charges may differ, possibly materially, from the estimates provided above. See Note 19, “Restructuring Expenses and Operating Model Optimization Initiatives,” to the Consolidated Financial Statements included herein for further information.

Supplier Finance Program

As a part of our ongoing efforts to maximize working capital and manage liquidity, we work with suppliers to optimize payment terms and conditions on accounts payable through a voluntary supplier finance program. The program provides some of our suppliers with the opportunity to sell receivables due from us (our accounts payables) to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. We are not a party to the arrangements between the suppliers and the third-party financial institutions. Our obligations to the suppliers, including amounts due, and scheduled payment dates (which have general payment terms between 30 and 120 days), are not affected by a participating supplier’s decision to participate in the program. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Supplier Finance Program,” to the Consolidated Financial Statements included herein.

Senior Notes

On March 22, 2023, we issued eight series of senior unsecured notes (the “Senior Notes”) in an aggregate principal amount of $7.75 billion. The net proceeds to us from the Senior Notes were approximately $7.7 billion after deductions of discounts and issuance costs of $77 million. The net proceeds were reflected as Restricted cash on the Consolidated Balance Sheet prior to their release from escrow on April 5, 2023. Upon release from escrow, these funds were loaned to J&J through a facility agreement (the “Facility Agreement”) dated April 5, 2023. The interest payments on the Senior Notes are due on March 22 and September 22 of each year, and commenced on September 22, 2023. For further details on the Senior Notes, see Note 5, “Borrowings—Senior Notes,” to the Consolidated Financial Statements included herein.

Our Senior Notes are governed by an indenture and supplemental indenture between us and a trustee (collectively, the “Indenture”). The Indenture contains certain covenants, including limitations on us and certain of our subsidiaries’ ability to incur liens or engage in certain sale-leaseback transactions. The Indenture also contains restrictions on our ability to consolidate, merge, or sell substantially all of our assets. In addition, the Indenture contains other customary terms, including certain events of default, upon the occurrence of which the Senior Notes may be declared immediately due and payable.

Commercial Paper Program

On March 3, 2023, we entered into a commercial paper program (the “Commercial Paper Program”). Our Board has authorized the issuance of up to $4.0 billion in an aggregate principal amount of commercial paper under the Commercial Paper Program. Any such issuance will mature within 364 days from date of issue. The Commercial Paper Program contains representations and warranties, covenants, and defaults that are customary for this type of financing. The commercial paper notes issued under the Commercial Paper Program are unsecured notes ranking at least pari passu with all of our other senior unsecured indebtedness. For further details on the Commercial Paper Program, see Note 5, “Borrowings—Commercial Paper Program,” to the Consolidated Financial Statements included herein.

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Prior to the Kenvue IPO, we issued $1.25 billion under the Commercial Paper Program which, collectively with the Senior Notes as further described above, are referred to as the “Debt Financing Transactions.”

Revolving Credit Facility

On March 6, 2023, we entered into a credit agreement providing for a five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $4.0 billion to be made available in U.S. dollars and Euros. For further details on the Revolving Credit Facility, see Note 5, “Borrowings—Revolving Credit Facility,” to the Consolidated Financial Statements included herein.

Facility Agreement

On April 5, 2023, we entered into the Facility Agreement, allowing us to lend the proceeds from the issuance of debt (including commercial paper) in an aggregate amount of $8.9 billion to J&J.

Upon completion of the Kenvue IPO on May 8, 2023, the Facility Agreement was terminated and the balance of the loans, and all accrued interest, were repaid by J&J for a total cash inflow of $9.0 billion. We remitted this cash back to J&J as a distribution in connection with the Separation.

Distribution to J&J

On May 8, 2023, in conjunction with the Consumer Health Business Transfer, we distributed $13.8 billion to J&J from 1) the net proceeds received from the sale of the common stock in the Kenvue IPO, 2) the net proceeds received from the Debt Financing Transactions, and 3) any cash and cash equivalents in excess of the $1.17 billion retained by us immediately following the Kenvue IPO.

Interest Expense, Net

We recognized Interest expense, net of $378 million in the Consolidated Statement of Operations during the fiscal twelve months ended December 29, 2024, which primarily includes interest expense, including amortization of discounts and debt issuance costs, recognized on the Senior Notes and interest expense recognized on notes issued under the Commercial Paper Program.

Compliance with Covenants

As of December 29, 2024, we were in compliance with all debt covenants, and no default or event of default has occurred.

Future Cash Requirements

We expect our future cash requirements will relate to working capital, capital expenditures, restructuring and integration, compensation and benefit-related obligations, interest expense and debt service obligations, litigation costs, the return of capital to shareholders, including through the payment of any dividends, and other contractual obligations that arise in the normal course of business. We may also use cash to enter into business development transactions, such as licensing arrangements or strategic acquisitions.

As of December 29, 2024, we expect our primary cash requirements for fiscal year 2025 to include capital expenditures. We made payments of $434 million for property, plant, and equipment during the fiscal twelve months ended December 29, 2024.

Share Repurchase Program

Our Board has authorized a share repurchase program, under which we are authorized to repurchase up to 27,000,000 shares of our outstanding common stock in open market or privately negotiated transactions. The program has no expiration date and may be suspended or discontinued at any time. The intent of this repurchase program is to offset dilution from the vesting or exercise of equity-based awards under the Kenvue 2023 Plan (as defined in Note 11, “Stock-Based Compensation,” to the Consolidated Financial Statements included herein). We repurchased 10,858,444 shares of our outstanding common stock for $235 million under the program during the fiscal twelve months ended December 29, 2024.

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Contractual Obligations

We are party to contractual obligations involving commitments to make payments to third parties, which impact our short-term and long-term liquidity and capital resource needs. Our contractual cash obligations include required payments of short-term and long-term debt principal and interest, purchase obligations, expected obligations under our pension plans, operating and finance lease payments, and tax-related obligations. Our material cash requirements include the following contractual and other obligations:

•Debt Obligations and Interest Payments—See Note 5, “Borrowings,” to the Consolidated Financial Statements included herein for additional information on our debt and the timing of expected future principal and interest payments.

•Purchase Obligations—As of December 29, 2024, we had purchase obligations of approximately $0.5 billion in connection with suppliers for the purchases of raw materials, packaging, other materials, and finished goods in the normal course of business, which are payable within 12 months.

•Pensions—It is our objective to contribute to the pension plans to ensure adequate funds are available to make benefit payments to plan participants and beneficiaries when required. See Note 7, “Pensions,” to the Consolidated Financial Statements included herein for additional information on our pension plans and the timing of expected future payments related to projected benefit plan contributions.

•Leases—See Note 8, “Leases,” to the Consolidated Financial Statements included herein for additional information on our operating and finance leases and the timing of expected future payments.

See Note 14, “Income Taxes,” to the Consolidated Financial Statements included herein for additional information on our tax-related obligations.

Future Litigation

In the ordinary course of business, we are involved in litigation, claims, government inquiries, investigations, charges, and proceedings. See Note 17, “Commitments and Contingencies,” to the Consolidated Financial Statements included herein for further details regarding certain matters that are currently pending. Our ability to successfully resolve pending and future litigation may adversely impact our financial condition, results of operations, or cash flows.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements (as defined under the rules and regulations of the SEC) or any relationships with unconsolidated entities that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, Net sales or expenses, results of operations, liquidity, cash requirements, or capital resources.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those policies and estimates made in accordance with U.S. GAAP that are most important and material to the preparation of the Consolidated Financial Statements and which require management’s most subjective and complex judgments due to the need to select policies from various alternatives available and to make estimates about matters that are inherently uncertain. We base our estimates on historical experience and other factors that we believe to be reasonable under the circumstances. On an ongoing basis, we review our estimates to ensure that these estimates appropriately reflect changes in our business and new information as it becomes available. If historical experience and other factors we use to make these estimates do not reasonably reflect future activity, our business, results of operations, or financial condition could be adversely affected.

Revenue Recognition

Our revenue contracts represent a single performance obligation to sell our products to customers. Revenue from the sale of products to customers is recognized at a single point in time when ownership, risks, and rewards transfer, which can be on the date of shipment or the date of receipt by the customer depending on the terms of the contract. Net sales exclude taxes collected by us on behalf of governmental authorities and include the shipping and handling fees charged to customers.

The nature of our business gives rise to several types of variable consideration including trade promotions, comprised of coupons, product listing allowances, cooperative advertising arrangements, volume-based incentive programs, as well as

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discounts to customers, rebates, sales incentives, and product returns, which are estimated at the time of the sale using the “expected value” method or the “most likely amount” method based on the form of variable consideration. Trade promotions, discounts to customers, rebates, and sales incentives are issued to customers at the point of sale and are estimated based on contractual terms, historical experience, trend analysis, and projected market conditions in the various markets served. Revenue is recognized net of provisions for discounts and trade promotions. The potential of estimates to vary differs by product, customer type, and geographic location. Historically, adjustments to these estimates to reflect updated expectations or actual results have not been material to our overall business.

See Note 18 “Segments of Business and Geographic Areas,” to the Consolidated Financial Statements included herein for disaggregation of Net sales and Note 1, “Description of the Company and Summary of Significant Accounting Policies—Revenue Recognition,” to the Consolidated Financial Statements included herein for further information regarding revenue recognition.

Income Taxes

Prior to the Kenvue IPO, our operations were calculated on a carve-out basis and included certain hypothetical foreign tax credit benefits. Following the Kenvue IPO, these hypothetical foreign tax credit benefits are not available for future utilization by us and were removed from the tax provision. Furthermore, we operated as part of J&J until the completion of the Exchange Offer on August 23, 2023, and therefore the Company was included in J&J’s U.S. Federal consolidated income tax return until that date. We filed a standalone U.S. Federal consolidated income tax return and a standalone return in most other jurisdictions in which it operates for the remainder of fiscal year 2023 and will continue to file a standalone return for all fiscal years thereafter. Certain current income tax liabilities related to our activities included in J&J’s income tax returns were assumed to be immediately settled with J&J through the Net Investment from J&J or Additional Paid-In Capital accounts on the Consolidated Balance Sheets and reflected in the Consolidated Statements of Cash Flows as a financing activity for the fiscal twelve months ended December 31, 2023 and January 1, 2023. Following the Exchange Offer, our operating footprint, as well as tax return elections and assertions, are different, and therefore, our income taxes, as presented in the Consolidated Financial Statements, may differ in future periods.

Income taxes are recorded based on amounts refundable or payable for the current fiscal year and include the results of any differences between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. We estimate deferred tax assets and liabilities based on enacted tax regulations and rates. Future changes in tax laws and rates may affect recorded deferred tax assets and liabilities.

U.S. Federal, state, and foreign income tax payables and receivables are recognized on the Consolidated Balance Sheets for entities that file separate income tax returns and make direct payments to taxing authorities. Prior to the Kenvue IPO, U.S. federal, state, and foreign income tax payables and receivables for entities that were included in the filing of a combined, consolidated, or group income tax return with J&J were deemed settled with J&J and were included in “Net Investment from J&J.”

Management establishes valuation allowances on deferred tax assets when it is determined to be “more likely than not” that some portion or all of the deferred tax assets may not be realized. Management considers positive and negative evidence in evaluating our ability to realize our deferred tax assets, including our historical results, forecasts of future ability to realize our deferred tax assets, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis.

We have unrecognized tax benefits for uncertain tax positions. We follow U.S. GAAP, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The estimates for these positions are regularly assessed based upon all available information. These estimates may be revised in the future and such changes may result in a material additional expense or benefit to our financial results or our effective tax rate.

In the United States, the Tax Cuts and Jobs Act of 2017 (“TCJA”) includes provisions for Global Intangible Low-Tax Income (“GILTI”). GILTI is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets, as provided by the TCJA. In January 2018, the Financial Accounting Standards Board issued guidance that allowed companies to elect as an accounting policy whether to record the tax effects of GILTI in the period the tax liability is generated (i.e., “period cost”) or to provide for deferred tax assets and liabilities related to basis differences that exist at the balance sheet date and are expected to affect the amount of GILTI inclusion in future years upon reversal (i.e., “deferred method”). We previously followed J&J’s accounting policy to consider the deferred tax effects of GILTI. Effective in the fiscal three months

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ended October 1, 2023, the Company changed the accounting principle for GILTI from the deferred approach to the period cost approach.

We entered into a tax matters agreement with J&J in connection with the Separation. For more information on the Tax Matters Agreement, see Note 12, “Relationship with J&J—Transactions with J&J, Including the Separation Agreement,” to the Consolidated Financial Statements included herein and our 2024 Proxy Statement.

See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Income Taxes,” and Note 14, “Income Taxes,” to the Consolidated Financial Statements included herein for further information regarding income taxes.

See Note 14, “Income Taxes,” to the Consolidated Financial Statements included herein for the Company’s analysis on material changes in tax law.

Intangible Assets and Goodwill

Intangible Assets Not Subject to Amortization

A significant portion of our intangible assets relates to trademarks and trade names that have an indefinite useful life. We re-evaluate the useful life determination for our indefinite-lived trademarks and trade names each year to determine whether events and circumstances continue to support an indefinite useful life.

Intangible assets deemed to have indefinite lives are not amortized but are subjected to annual tests of impairment, or more frequently if events or changes in circumstances between annual tests indicate that assets may be impaired. We have the option to first assess qualitative factors to determine whether the quantitative indefinite-lived intangible asset impairment test is necessary. We may bypass the qualitative assessment in any period and proceed directly to performing the quantitative impairment test.

As part of our qualitative assessment, we consider several factors including macroeconomics conditions (including changes in interest rates and discount rates), the recent and projected financial performance of our tested brands, significant changes in the specific market or regulatory environment in which we operate that would change the position of our products in the marketplace, pending litigation, and other factors, including the results of our last quantitative assessment.

When performing the quantitative impairment assessment, we compare the estimated fair value of our trademarks and trade names to their carrying amounts as of the test date, which is on the first day of the fiscal fourth quarter. We estimate the fair value of trademarks and trade names based on an income approach using the relief-from-royalty method. This valuation requires significant judgments and estimates by management regarding several key inputs, including future cash flows consistent with management’s plans, sales growth rates, the selection of royalty rates, and a discount rate. As the fair value measurements required to estimate the fair value of the trademarks and trade names are based on significant inputs not observable in the market, they represent Level 3 measurements within the fair value hierarchy.

Intangible Assets Subject to Amortization

Our definite-lived intangible assets (primarily trademarks, trade names, and customers lists) are amortized over their estimated useful lives. We re-evaluate the useful life determinations for definite-lived intangible assets annually to determine whether events or circumstances warrant a revision to their remaining useful lives. Our definite-lived intangible assets are subjected to a test of impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When assessing for potential indicators of impairment, we consider several factors including any adverse changes in legal factors or in the business climate that could affect the value of an asset, any adverse changes in the extent or manner in which an asset is used or is expected to be used, and current or forecasted reductions in net sales, operating income, or cash flows associated with the use of an asset.

If any indicators of impairment are present, the asset group is tested for recoverability by comparing the carrying amount of the asset group to the net undiscounted cash flows expected to be generated from the asset group. If the net undiscounted cash flows are less than the carrying value of the asset group, we then perform the next step, which is to determine the fair value of the asset group, and record an impairment, if any.

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Goodwill

Goodwill is not amortized but is subjected to annual tests of impairment at the reporting unit level, or more frequently if events or changes in circumstances between annual tests indicate that goodwill may be impaired. We have the option to first assess qualitative factors to determine whether the quantitative goodwill impairment test is necessary. We may bypass the qualitative assessment in any period and proceed directly to performing the quantitative assessment.

When assessing for potential indicators of impairment, we consider several factors including macroeconomic industry and market conditions, significant adverse shifts in the operating environment or manner in which assets are used, and pending litigation.

When performing the quantitative assessment, we compare the estimated fair value of each of our reporting units to their carrying value as of the test date, which is on the first day of the fiscal fourth quarter. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants. We estimate the fair value of a reporting unit using a discounted cash flow model. The discounted cash flow model relies on assumptions regarding revenue and net income growth rates, projected working capital needs, capital expenditures, and discount rates. To estimate fair value, we discount the forecasted cash flows of each reporting unit. The discount rate we use represents the estimated weighted-average cost of capital, which reflects the overall level of inherent risk involved in the reporting unit’s operations and the rate of return a market participant would expect to earn. The quantitative fair value test is performed utilizing long-term growth rates and discount rates applied to the estimated cash flows in estimation of fair value.

To forecast a reporting unit’s cash flows, we take into consideration economic conditions and trends, estimated future operating results, management’s projections, a market participant’s view of growth rates and product lives, and anticipated future economic conditions. Revenue growth rates inherent in these forecasts are based on input from internal and external market research that compare factors such as growth in global economies, recent industry trends, and product lifecycles. Macroeconomic factors such as changes in global economies, changes in the competitive landscape, changes in government legislation, product lifecycles, industry consolidations, and other changes beyond our control could have a positive or negative impact on achieving its targets. Accordingly, if market conditions deteriorate, or if we are unable to execute our strategies, it may be necessary to record impairment charges in the future. As the fair value measurements required to estimate the fair value of our reporting units are based on significant inputs not observable in the market, they represent Level 3 measurements within the fair value hierarchy.

See Note 1, “Description of the Company and Summary of Significant Accounting Policies,” and Note 4, “Intangible Assets and Goodwill,” to the Consolidated Financial Statements included herein for further information regarding intangible assets and goodwill.

Stock-Based Compensation

We recognize compensation costs related to equity-based awards granted ratably over the requisite service period, which is the vesting period of the award, based on the estimated grant date fair value of the awards.

The grant date fair value of each stock option granted is estimated on the grant date using the Black-Scholes option valuation model. The inputs used in determining the grant date fair value are the expected volatility, expected dividend yield, risk-free rate, and expected term.

The grant date fair value of each restricted stock unit (“RSU”) granted is equivalent to the closing price of our common stock on the New York Stock Exchange on the grant date.

We grant performance stock units (“PSUs”), including those with both performance vesting conditions and market-based vesting conditions (the “Performance PSUs”). The grant date fair value of each Performance PSU granted, inclusive of the fair value associated with the achievement of the specified performance metrics and the relative total shareholder return goal, is estimated on the grant date using the Monte Carlo valuation model. The inputs used in determining the grant fate fair value are the length of the performance period, the risk-free rate, and the stock prices, correlations, and expected volatility of the Company and the firms in the selected peer group. The payout of the Performance PSUs is assessed by determining the achievement of the specified performance metrics as well as by comparing the Company’s total shareholder return (“TSR”) during a three-year period to the respective TSR of companies in a selected performance peer group. Given the requirement to meet certain defined performance and market criteria, the recipient of a Performance PSU may earn a total payout ranging from 0% to 200% of the target award.

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During the fiscal twelve months ended December 31, 2023, we granted PSUs that have a singular market condition (the “Market PSUs”). The grant date fair value of each Market PSU granted, inclusive of the fair value associated with the relative total shareholder return goal, was estimated on the grant date using the Monte Carlo valuation model. The inputs used in determining the grant date fair value were the length of the performance period, the risk-free rate, and the stock prices, correlations, and expected volatility of the Company and the firms in the selected peer group. The payout of the Market PSUs awards is assessed by comparing the Company’s TSR during a three-year period to the respective TSR of companies in a selected performance peer group. Given the requirement to meet certain defined market criteria, the recipient of a Market PSU may earn a total payout ranging from 0% to 200% of the target award.

For all equity-based awards, the original estimate of the grant date fair value is not subsequently revised unless the awards are modified. The Company accounts for forfeitures during the period in which they occur.

See Note 11, “Stock-Based Compensation,” to the Consolidated Financial Statements included herein for more information on equity-based awards granted by Kenvue.

Recent Accounting Standards

See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Recent Accounting Standards Not Yet Adopted,” to the Consolidated Financial Statements included herein for a description of recently issued accounting standards not yet adopted and their anticipated impact to the Consolidated Financial Statements.

Other Information

Baby Powder Transition

On August 11, 2022, we announced the commercial decision to transition to an all cornstarch-based baby powder portfolio. As a result of this transition, talc-based Johnson’s® Baby Powder was discontinued globally in 2023. Talc-based Johnson’s® Baby Powder was previously discontinued during 2020 in certain markets, including the United States and Canada. The impact of this change did not have a significant impact on our results of operations.

Deferred Markets

Pursuant to the Separation Agreement, in order to ensure compliance with applicable law, to obtain necessary governmental approvals and other consents, and for other business reasons, we and J&J deferred certain transfers of assets and assumptions of liabilities of businesses in certain non-U.S. jurisdictions, including China, Malaysia, and Russia, until after the completion of the Kenvue IPO. On September 11, 2023, J&J transferred the equity interests in the majority of the Deferred Legal Entities (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein) to the Company that previously had been consolidated as Variable Interest Entities in the Consolidated Financial Statements. The Consolidated Financial Statements included herein include businesses in all jurisdictions in which we operate following the completion of the Separation, including any Deferred Local Business (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein). For more information regarding Deferred Local Businesses, see Part I, Item 1A, “Risk Factors—Risks Related to Our Relationship with J&J—The transfer of certain assets and liabilities from J&J to us contemplated by the Separation has not been completed and may be significantly delayed or not occur at all,” and Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein.

Provision For Taxes

On December 15, 2022, the EU Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation Development (“OECD”) Pillar Two Inclusive Framework that was supported by over 130 countries worldwide. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. On July 17, 2023, the OECD published Administrative Guidance proposing certain safe harbors that effectively extend certain effective dates to January 1, 2027. The OECD continues to release additional guidance, including guidance on safe harbors for which we may qualify, and many countries have already implemented legislation consistent with the OECD Pillar Two Framework. Due to these new rules, our provision for taxes could be unfavorably impacted as the legislation becomes effective in countries in which we conduct business. However, based on our current analysis, currently enacted laws for Pillar Two do not have a significant impact on the Consolidated Financial

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Statements. We are continuing to evaluate the Model Global Anti-Base Erosion Rules for Pillar Two and related legislation, and their potential impact on future periods.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Company Overview

At Kenvue, our purpose is to realize the extraordinary power of everyday care. As a global leader at the intersection of healthcare and consumer goods, we are the world’s largest pure-play consumer health company by revenue with $15.4 billion in Net sales in 2023. By combining the power of science with meaningful human insights and digital-first approach, we empower consumers to live healthier lives every day. Trusted by generations, our differentiated portfolio of iconic brands—including Tylenol®, Neutrogena®, Listerine®, Johnson’s®, BAND-AID® Brand Adhesive Bandages, Aveeno®, Zyrtec®, and Nicorette®—is backed by science and recommended by healthcare professionals, which further reinforces our consumers’ connections to our brands.

Our portfolio includes Self Care, Skin Health and Beauty, and Essential Health products, allowing us to connect with consumers globally—in their daily rituals and the moments that matter most.

Our global scale and the breadth of our brand portfolio are complemented by our well-developed capabilities and accelerated through our digital-first approach, allowing us to dynamically capitalize on and respond to current trends impacting our categories and geographic markets.

With a sole focus on consumer health, our marketing organization operates efficiently by leveraging our precision marketing, e-commerce, and broader digital capabilities to develop unique consumer insights and further enhance the relevance of our brands. Similarly, our research and development organization combines these consumer insights with deep, multi-disciplinary scientific expertise, and engagement with healthcare professionals, to drive innovative new products, solutions, and experiences centered around consumer health.

Our Business Segments

We operate our business through the following three reportable business segments:

•Self Care. Our Self Care product categories include: Pain Care; Cough, Cold and Allergy; and Other Self Care (Digestive Health, Smoking Cessation, Eye Care, and Other). Major brands in the segment include Tylenol®, Motrin®, Nicorette®, Benadryl®, Zyrtec®, Zarbee’s®, ORSLTM, Rhinocort®, and Calpol®.

•Skin Health and Beauty. Our Skin Health and Beauty product categories include: Face and Body Care; and Hair, Sun and Other. Major brands in the segment include Neutrogena®, Aveeno®, Dr.Ci:Labo®, OGX®, Le Petit Marseillais®, Lubriderm®, and Rogaine®.

•Essential Health. Our Essential Health product categories include: Oral Care; Baby Care; and Other Essential Health (Women’s Health, Wound Care, and Other). Major brands in the segment include Listerine®, Johnson’s®, BAND-AID® Brand Adhesive Bandages, Stayfree®, o.b.® tampons, Carefree®, and Desitin® Diaper Rash.

For additional information about our three reportable business segments, see “—Key Factors Affecting Our Results—Our Brands and Product Portfolio” and Note 19, “Segments of Business and Geographic Areas,” to the Consolidated Financial Statements.

Separation from Johnson & Johnson

In November 2021, Johnson & Johnson (“J&J”), our former parent company, announced its intention to separate its Consumer Health segment (the “Consumer Health Business”) into an independent publicly traded company (the “Separation”). Kenvue was incorporated in Delaware in February 2022, as a wholly owned subsidiary of J&J, to serve as the ultimate parent company of J&J’s Consumer Health Business. In April 2023, J&J completed the transfer of substantially all of the assets and liabilities of the Consumer Health Business to us and our subsidiaries. In May 2023, we completed an initial public offering (the “IPO” or “Kenvue IPO”) of approximately 10.4% of our outstanding common stock and began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “KVUE.” Following the Kenvue IPO, J&J owned approximately 89.6% of our outstanding common stock. In July 2023, J&J announced an exchange offer (the “Exchange Offer”) under which its shareholders could

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exchange shares of J&J common stock for shares of our common stock owned by J&J. In August 2023, J&J completed the Exchange Offer and exchanged shares representing 80.1% of our common stock, completing the Separation from J&J and transition to being a fully independent public company. Following the Separation, J&J continues to own approximately 9.5% of our outstanding common stock.

See Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements for additional information.

We are incurring certain costs in connection with our establishment as a standalone public company (the “Separation-related costs”). We expect the non-recurring Separation-related costs will continue through at least fiscal year 2024. For additional information about the Separation, see Note 1, “Description of the Company and Summary of Significant Accounting Policies,” and Note 12, “Relationship with J&J,” to the Consolidated Financial Statements included herein.

Relationship with J&J

We have entered into the Separation Agreement and various other agreements with J&J for the purpose of effecting the Separation. These agreements provide a framework for our relationship with J&J and govern various interim and ongoing relationships between us and J&J that follow the completion of the Kenvue IPO. See Note 12, “Relationship with J&J,” to the Consolidated Financial Statements included herein for additional information on these agreements.

Kenvue Headquarters

On April 20, 2023, we entered into a long-term lease for a newly renovated office building and a newly constructed R&D building in Summit, New Jersey that, when completed, will encompass a total of approximately 290,000 square feet and serve as the Company’s new global corporate headquarters and R&D center. The relocation to this campus is expected to commence in 2025 for the office building and continue through 2026 for the new R&D building. We will continue to operate from our interim corporate headquarters in Skillman, New Jersey until that time. On February 21, 2024, we listed our headquarters in Skillman for sale, which met the criteria to be classified as held for sale at that date. We are currently evaluating the impact of the change in classification on our results of operations for the first quarter 2024.

Key Factors Affecting Our Results

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part 1, Item 1A, “Risk Factors,” of this Form 10-K.

Our Brands and Product Portfolio

We have a world class, global portfolio of iconic and modern brands, and we have been making and investing in consumer products for over 135 years that are trusted by generations of consumers. Our business is balanced and resilient with leading brands across categories and geographic markets. Our brands are widely recognized and represent a combination of global powerhouses and regional brands, many of which hold leading positions in their respective categories. Our brands are built for moments that uniquely matter; these moments of care create an emotional connection to our products that forms deep bonds between consumers and our brands.

Consumers, customers, and third-party partners value and trust the reputation, reliability, and status of our brands and the quality, performance, and functionality of our products, and we believe there are significant opportunities to further increase our category and brand penetration by continuing to deepen our brand relevance and salience across our portfolio, continually earning a place for our products in consumers’ hearts and homes.

Shifting Consumer Preferences

Everyday care has never been a more essential part of the consumer health journey. Globally, preferences and expectations for consumer health products continue to evolve, with a heightened focus on preventative care and science-backed solutions. While the focus on consumer health was already on the rise before the COVID-19 pandemic, this focus has further accelerated through the full cycle of the pandemic. Consumers are also shifting the paradigm of beauty towards health. Other recent trends that have affected consumer preferences include an aging population, premiumization (where consumers switch their purchases to premium alternatives), a growing middle class in emerging markets, and the rise of digital ecosystems that create new opportunities for personalized health solutions. We expect these trends to continue and that consumers will continue to seek solutions that meet their health goals, creating growth opportunities across our product portfolio.

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Consumer preferences and purchasing patterns are difficult to predict and may fluctuate rapidly. Moreover, market trends and consumer preferences and purchasing patterns may vary by geographic region, and we seek to complement our portfolio of iconic global brands with strong regional brands that are uniquely tailored to local preferences and trends.

Innovation

We rely on science. We have always prioritized science as the core of how we provide care, and we remain committed to this approach. Our ability to quickly develop new products and technologies and to adapt and market our products on an ongoing basis to meet evolving consumer preferences is an essential component of our business strategy. Several of our products have a long history of life-enhancing, first-to-market innovations. In many situations, we have driven the innovation and clinical compendium of entire categories. By leveraging world-class research and development capabilities and a team of research and development professionals, we have a multi-disciplinary and differentiated approach to innovation.

Increased Competition

Our products are sold in a highly competitive global marketplace, which, in recent years, has experienced increased retail trade concentration, the emergence of retail buying alliances, the rapid growth of e-commerce, and the integration of traditional and digital operations at key retail trade customers. One of our customers accounted for approximately 12%, 13%, and 14% of our total Net sales for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively. Our top 10 customers represented approximately 41%, 42%, and 43% of our total Net sales for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively. As a result of these trends, certain large-format retail trade customers have significant bargaining strength and represent a significant proportion of our total Net sales.

We face substantial competition in each of our business segments and product lines and across all geographic markets in which we operate. We compete with companies of all sizes on the basis of cost-effectiveness, product performance, real or perceived product advantages, intellectual property rights, advertising, and promotional activities, brand recognition and loyalty, consumer convenience, pricing, and geographic reach. Our competitors include multinational corporations, smaller companies that often operate on a regional basis, retailers’ private-label brands, and generic non-branded products. Many of these competitors have benefited from the substantial growth in e-commerce and focus extensively on direct to consumer or other non-traditional, digital business models. Competitive factors impacting our business also include market dynamics and evolving consumer preferences, brand image, a broad product portfolio, new product innovations and product development, pricing that is attractive to consumers, cost inputs, and the ability to attract and retain talented employees. We expect that the continued attractiveness of the categories and geographic markets in which we operate will encourage the entry of new competitors of all sizes, which could increase these and other competitive pressures in the future.

Sourcing, Manufacturing, and Supply Chain Management

Our ability to meet the needs of our consumers and customers depends on the proper functioning of our manufacturing and supplier operations. Our manufacturing operations require the timely delivery of sufficient amounts of complex, high-quality components and materials. We have built our supply chain network to deploy resources across the globe where they are most needed. Our sourcing, manufacturing, and demand planning capabilities are continuously optimized to meet evolving market dynamics. Our extensive distribution network and sales organization enable us to establish strategic partnerships with key suppliers and retailers across multiple markets and channels, where we further leverage our scale to drive flexible manufacturing capacity and supply chain optimization. We believe this approach builds and supports our resilience across economic cycles and allows us to prioritize or expand our geographic focus based on our strategic priorities. Nonetheless, in recent years, we have experienced, and continue to experience, higher than expected inflation, including escalating transportation, commodity, and other supply-chain costs and disruptions that have adversely affected, and continue to adversely affect, our results of operations. Although certain costs have moderated to an extent, we continue to experience higher energy and labor costs.

Supply Chain Optimization Initiatives

Since 2019, we have taken significant steps to meet consumer demand and mitigate supply chain constraints. We have redesigned our manufacturing and distribution network, optimizing both in-house and external manufacturing and distribution footprints to improve lead time and reliability across the globe. We selectively invested in specific technologies and expanded our capacity in different geographic markets with the intent to increase competitiveness by improving cost, speed, compliance, and customer service. As a result, our historical results of operations reflect savings delivered through these end-to-end supply chain optimization initiatives.

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Macroeconomic Trends

Macroeconomic factors affect consumer spending patterns and thereby our results of operations. These factors include general economic conditions, inflation, consumer confidence, employment rates, business conditions, the availability of credit, interest rates, tax rates, and fuel and energy costs. Factors that impact consumer discretionary spending, which remain volatile globally, continue to create a complex and challenging retail environment for us and our third-party partners. We intend to continue to evaluate and adjust our operating strategies and cost management opportunities to help mitigate any impacts on our results of operations resulting from broader macroeconomic conditions and policy changes, while remaining focused on the long-term growth of our business.

Global economic challenges, including the impact from acts of war, military actions, terrorist attacks, or civil unrest, such as the ongoing Russia-Ukraine War or the ongoing conflict in the Middle East, may continue to cause economic uncertainty and volatility. The impact of these issues may adversely affect prevailing economic conditions and our business, results of operations or financial condition.

Russia-Ukraine War

Although the long-term implications of the ongoing military conflict between Russia and Ukraine (the “Russia-Ukraine War”) are difficult to predict at this time, the financial impact of the conflict to us during the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 was not significant to our results of operations. For the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, our Ukrainian business represented 0.2%, 0.1%, and 0.3% of our Net sales, respectively. For the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022, our Russian business represented 1.0%, 1.4%, and 1.8% of our Net sales, respectively.

In the first quarter of fiscal year 2022, we announced our decision to suspend supply of all of our products into Russia other than our over-the-counter medicines within our Self Care segment, which we continued to supply as patients rely on many of these products for healthcare purposes. Supply of the suspended products terminated during the second quarter of fiscal year 2022. We also suspended all advertising in Russia, all clinical trials in Russia, and any additional investment in Russia. We will continue to monitor the geopolitical situation in Russia and to evaluate our activities and future operations in Russia.

Foreign Currency Exposure

We report our consolidated financial results in U.S. dollars but have significant non-U.S. operations. A large portion of our business is conducted in currencies other than U.S. dollars, and generally the applicable local currency is our functional currency in that locality. As a result, we face foreign currency exposure on the translation into U.S. dollars of our results of operations in numerous jurisdictions primarily in the European Union, the United Kingdom, Japan, China, Canada, Brazil, and India. In addition, as we continue to expand our global operations, our exposure to foreign currency risk could become more significant, particularly if the U.S. dollar strengthens in the future.

Where possible, we manage foreign currency exposure through a variety of methods. We may adopt natural hedging strategies whereby favorable and unfavorable foreign currency impacts to our foreign currency-denominated operating expenses are mitigated to a certain extent by the natural, opposite impact on our foreign currency-denominated Net sales. In an effort to minimize the impact on earnings and cash flows of foreign currency rate movements, we engage in a combination of selling price increases, where permitted, sourcing strategies, cost-containment measures and selective hedging of foreign currency transactions. We cannot guarantee that foreign currency exchange rates will be stable in the future or that foreign currency risk can be mitigated with these risk management strategies. Nonetheless, it is not practical for us to mitigate all of our foreign currency exposure, nor are we able to accurately predict the possible impact of future foreign currency exchange rate fluctuations on our results of operations, due to our constantly changing exposure to various foreign currencies, difficulty in predicting fluctuations in foreign currency exchange rates relative to the U.S. dollar, and the significant number of foreign currencies involved.

Acquisitions and Divestitures

We refine our portfolio through acquisitions towards high-growth, high-margin businesses as well as divestitures of assets that we do not believe are well integrated into our product portfolio and strategic direction. We have demonstrated an ability to successfully integrate and scale acquired businesses to further build upon our market leadership across our product portfolio. During the fiscal twelve months ended January 2, 2022, we divested several brands globally in line with our strategy. We did

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not complete any significant acquisitions or divestitures during the fiscal twelve months ended December 31, 2023 and January 1, 2023.

We intend to continue to pursue a disciplined and prudent approach to acquisitions and partnership opportunities that accelerate growth within our business. We believe our strong balance sheet will allow us to strategically make acquisitions and divestitures while maintaining our disciplined approach to capital allocation.

Legal Proceedings

We and/or certain of our subsidiaries are involved from time to time in various lawsuits and claims relating to intellectual property, commercial contracts, product liability, labeling, marketing, advertising, pricing, antitrust and trade regulation, labor and employment, indemnification, data privacy and security, environmental, health and safety, and tax matters, governmental investigations, and other legal proceedings that arise in the ordinary course of our business. See Note 17, “Commitments and Contingencies,” to the Consolidated Financial Statements included herein for additional information regarding our current legal proceedings.

A significant number of personal injury claims alleging that talc causes cancer were made against J&J and certain of its affiliates arising out of the use of body powders containing talc, primarily Johnson’s® Baby Powder. These personal injury suits were filed primarily in state and federal courts in the United States and in Canada.

Pursuant to the Separation Agreement, J&J has retained all liabilities on account of or relating to harm arising out of, based upon or resulting from, directly or indirectly, the presence of or exposure to talc or talc-containing products sold by J&J or its affiliates in the United States and Canada (the “Talc-Related Liabilities”) and, as a result, has agreed to indemnify us for the Talc-Related Liabilities in the United States and Canada and any costs associated with resolving such claims. We will, however, remain responsible for all liabilities on account of or relating to harm arising out of, based upon or resulting from, directly or indirectly, the presence of or exposure to talc or talc-containing products sold outside the United States or Canada.

Except for the Talc-Related Liabilities and certain other liabilities for which the Company was indemnified by J&J, the Company generally remains responsible for liabilities relating to, arising out of, or resulting from the past or current operation or conduct of the Company’s business.

Restructuring

See Note 20, “Restructuring,” to the Consolidated Financial Statements included herein for information about our restructuring programs.

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Results of Operations

Fiscal Twelve Months Ended December 31, 2023 Compared with Fiscal Twelve Months Ended January 1, 2023

Our results for the fiscal twelve months ended December 31, 2023 and January 1, 2023 were as follows:

* Calculation not meaningful.

Net Sales

Net sales were $15.4 billion and $15.0 billion for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, an increase of $494 million, or 3.3%. Excluding the impact of unfavorable changes in currency rates of $253 million, Organic growth was $747 million, primarily attributable to value realization (defined as price including mix), and increased demand across our Self Care segment, with all product categories experiencing growth. In Skin Health and Beauty, growth was driven by the easing of supply chain constraints, strong e-commerce and club channel performance, one-time supply constraints, and the impact of a strong sun season on Sun Care. This growth in Skin Health and Beauty was partially offset by volume declines in the United States, due to underperformance in commercial in-store execution and portfolio rationalization initiatives in 2022, along with market softness in China. Momentum in Essential Health continued, driven by value realization and strong performance in Oral Care, along with growth in Women’s Health led by value realization and brand activation, partially offset by overall volume declines primarily due to category contractions, as well as our supply suspension of certain personal care products in Russia since March 2022.

Cost of Sales

Cost of sales were $6.8 billion and $6.7 billion for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, an increase of $136 million, or 2.0% primarily attributable to impact of higher costs of key ingredients and packaging materials due to the impact of inflation. The increase was partially offset by the realization of benefits associated with our supply chain optimization initiatives and $107 million favorable translational currency impacts. Gross profit margin increased 60 basis points to 56.0% as compared to the prior year primarily due to growth in Net sales driven by value realization and the realization of benefits associated with our supply chain optimization initiatives, partially offset by unfavorable transactional foreign currency fluctuations.

Selling, General, and Administrative Expenses

Selling, general, and administrative (“SG&A”) expenses were $6.1 billion and $5.6 billion for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, an increase of $508 million, or 9.0%. SG&A as a percentage of Net sales increased 210 basis points to 39.8%, as compared to the prior year, primarily attributable to higher costs in enterprise functions as we operate on a standalone basis, transition services agreement costs with J&J, and a $255 million increase in non-recurring Separation-related costs. These cost increases were partially offset by favorable currency impacts of $64 million.

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Other Operating Income, Net

Other operating income, net was $10 million and $23 million for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, a decrease of $13 million. The decrease was primarily driven by the accounting impact of net economic benefit arrangements with J&J in connection with the Deferred Local Businesses (see Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein for additional information) and an increase in litigation-related expenses, partially offset by the reversal of a contingent liability that was no longer considered to be probable and the gain recognized on the sale of a manufacturing facility in Lancaster, Pennsylvania of $9 million.

Other Expense, Net

Other expense, net was $72 million and $38 million for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, an increase in expense of $34 million, primarily driven by higher foreign currency losses and impairments on equity securities.

Interest Expense, Net

Interest expense, net was $250 million for the fiscal twelve months ended December 31, 2023 driven by the interest expense recognized on the Senior Notes and notes issued under the commercial paper program in 2023 in connection with the IPO, partially offset by interest income, including $33 million of interest earned on the debt proceeds in escrow and the Facility Agreement. See Note 5, “Borrowings,” to the Consolidated Financial Statements included herein for additional information.

Provision For Taxes

Provision for taxes was $526 million and $573 million for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, a decrease in income tax expense of $47 million. The decrease is primarily due to changes in income before taxes and tax reserve releases due to statute of limitation expirations. The decrease is offset by a reduction in our capacity to utilize foreign tax credits against U.S. foreign source income due to the increase in annual interest expense. As a result, we recorded a valuation allowance against a deferred tax asset related to future foreign tax credit benefits.

Fiscal Twelve Months Ended January 1, 2023 Compared with Fiscal Twelve Months Ended January 2, 2022

Our results for the fiscal twelve months ended January 1, 2023 and January 2, 2022 were as follows:

* Calculation not meaningful.

A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended January 1, 2023 and the fiscal twelve months ended January 2, 2022, with the exception of the Provision for taxes line item which is described below, can be found under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the final prospectus filed on May 4, 2023 with the U.S. Securities and Exchange Commission pursuant to Rule

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424(b)(4) under the Securities Act relating to the Company’s Registration Statement on Form S-1 (the “IPO Prospectus”) for the Kenvue IPO.

As described in Note 1, “Description of the Company and Summary of Significant Accounting Policies,” effective in the third quarter of fiscal year 2023, the Company changed its accounting principle for Global Intangible Low-Tax Income (“GILTI”) from the deferred approach to the period cost approach, which resulted in adjustments to the Provisions for taxes line item in the Consolidated Statements of Operations as compared to the amounts reported for the fiscal twelve months ended January 1, 2023 and January 2, 2022 in our IPO Prospectus. A detailed discussion of the period-over-period changes in the Provision for taxes line item for the fiscal twelve months ended January 1, 2023 and the fiscal twelve months ended January 2, 2022, inclusive of the adjustments for the change in accounting principle for GILTI, can be found below.

Provision For Taxes

Provision for taxes was $573 million and $847 million for the fiscal twelve months ended January 1, 2023 and January 2, 2022, respectively, a decrease in income tax expense of $274 million. The $274 million decrease in income tax expense was primarily due to a lower effective tax rate in the fiscal twelve months ended January 1, 2023 resulting from the ability to claim certain deductions and additional foreign tax credits that were limited in the fiscal twelve months ended January 2, 2022 as a result of the talc litigation settlement.

Segment Results

Segment profit is based on Operating income, excluding depreciation and amortization, non-recurring Separation-related costs, restructuring expenses and operating model optimization initiatives, the impact of the conversion of stock-based awards, issuance of Founder Shares, Other operating (income) expense, net, and unallocated general corporate administrative expenses (referred to herein as “Segment adjusted operating income”), as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which include expenses related to treasury, legal operations and certain other expenses, along with gains and losses related to the overall management of our company, are not allocated to the segments. In assessing segment performance and managing operations, management does not review segment assets.

See Note 19, “Segments of Business and Geographic Areas,” to the Consolidated Financial Statements included herein for additional information.

Fiscal Twelve Months Ended December 31, 2023 Compared with Fiscal Twelve Months Ended January 1, 2023

The following table presents Segment net sales and Segment adjusted operating income and the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022. See Note 19, “Segments of Business and Geographic Areas,” to the Consolidated Financial Statements included herein for further details regarding Segment net sales and Segment adjusted operating income.

(1) In the first quarter of fiscal year 2023, we adjusted the allocation for certain intangible asset amortization costs within Cost of Sales to align with segment financial results as measured by us, including the CODM. Accordingly, we updated its segment disclosures to reflect the updated presentation in all prior periods. Total segment adjusted operating income did not change as a result of this update.

(2) Exclusive of the restructuring expenses and operating model optimization initiatives included in Other operating income, net in the Company’s Consolidated Statements of Operations.

(3) Segment adjusted operating income excludes the impact of the conversion of stock-based awards (see Note 11, “Stock-Based Compensation”). This adjustment primarily represents the add-back of the net impact of the gain on reversal of previously recognized stock-based compensation expense of $148 million, offset by stock-based compensation expense recognized in the fiscal twelve months ended December 31, 2023 relating to employee services provided prior to the Separation of $203 million.

(4) On August 25, 2023, the Company’s Compensation & Human Capital Committee approved equity grants to individuals employed by Kenvue as of October 2, 2023 (the “Founder Shares”). On October 2, 2023, the Founder Shares were granted to all Kenvue employees in the form of stock options and PSUs to executive officers and either stock options and PSUs or RSUs to non-executive individuals (see Note 11, “Stock-Based Compensation”).

Organic Growth

We assess our Net sales performance by measuring Organic growth, a non-GAAP financial measure, which measures the period-over-period change in Net sales excluding the impact of changes in foreign currency exchange rates and the impact of

acquisitions and divestitures. Management believes Organic growth provides investors with additional, supplemental information that they may find useful in assessing our results of operations by excluding the impact of certain items that we believe do not directly reflect our underlying operations.

The following tables present a reconciliation of the change in U.S. GAAP Net sales to Organic growth for the fiscal twelve months ended December 31, 2023 compared to the fiscal twelve months ended January 1, 2023:

(1) Acquisitions and divestitures did not materially impact the reported Net sales change.

(2) Also referred to as value realization.

A detailed discussion of the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal twelve months ended December 31, 2023 and the fiscal twelve months ended January 1, 2023 is presented below. A detailed discussion of the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal twelve months ended January 1, 2023 and the fiscal twelve months ended January 2, 2022 can be found under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our IPO Prospectus.

Self Care Segment

Self Care Segment Net Sales

The Self Care Segment net sales were $6.5 billion and $6.0 billion for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, an increase of $421 million, or 7.0%. Excluding the unfavorable impact of foreign currency translation, Organic growth was $505 million or 8.4%, primarily driven by value realization of 7.1% and volume-related increases of 1.3% driven by increased demand across our Self Care segment, with all product categories experiencing growth. Increased demand for Cough, Cold, and Allergy products due to greater instances of respiratory illness, primarily in Europe and China, innovation-based volume growth, one-time supply replenishment, primarily in the United States, related to low trade inventory levels at the start of the year, and brand activation across product categories fueled growth for the segment.

Self Care Segment Adjusted Operating Income

The Self Care Segment adjusted operating income increased by $211 million, or 10.1% to $2.3 billion for the fiscal twelve months ended December 31, 2023. The increase was primarily driven by value realization, volume-related increases, and the realization of benefits associated with our supply chain optimization initiatives, partially offset by the negative impact of transactional foreign currency fluctuations and the negative impact of cost inflation.

Skin Health and Beauty Segment

Skin Health and Beauty Segment Net Sales

The Skin Health and Beauty Segment net sales were $4.4 billion and $4.4 billion for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, an increase of $28 million, or 0.6%. Excluding the unfavorable impact of foreign currency translation, Organic growth was $80 million, or 1.8%, primarily driven by value realization of 6.6%, offset by volume-related decreases of 4.8%. The increase was driven by the easing of supply chain constraints, strong e-commerce and club channel performance, one-time supply replenishment, and share gains in Sun Care, which were fueled by a strong sun season, partially offset by underperformance in commercial U.S. in-store execution, portfolio rationalization initiatives in 2022, and market softness in China.

Skin Health and Beauty Segment Adjusted Operating Income

The Skin Health and Beauty Segment adjusted operating income decreased by $29 million, or 4.1% to $679 million for the fiscal twelve months ended December 31, 2023. The decrease was primarily driven by the negative impact of cost inflation and the negative impact of transactional foreign currency fluctuations, partially offset by value realization and the realization of benefits associated with our supply chain optimization initiatives.

Essential Health Segment

Essential Health Segment Net Sales

The Essential Health Segment net sales were $4.6 billion and $4.6 billion for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, an increase of $45 million, or 1.0%. Excluding the unfavorable impact of foreign currency translation, Organic growth was $162 million, or 3.6%, primarily driven by value realization of 9.6%, led by strong performance in Oral Care and growth in Women’s Health. The increase was partially offset by volume declines of 6.0%, primarily due to category contractions, as well as our supply suspension of certain personal care products in Russia since March 2022.

Essential Health Segment Adjusted Operating Income

The Essential Health Segment adjusted operating income decreased by $100 million, or 9.0% to $1.0 billion for the fiscal twelve months ended December 31, 2023. The decrease was primarily driven by the negative impact of cost inflation and the negative impact of transactional foreign currency fluctuations, partially offset by value realization and the realization of benefits associated with our supply chain optimization initiatives.

Liquidity and Capital Resources

Prior to April 4, 2023, our working capital requirements and capital expenditures were satisfied as part of J&J’s corporate-wide cash management and centralized funding programs, and a substantial portion of our cash was transferred to J&J. Cash and cash equivalents held by J&J at the corporate level were not specifically identifiable to us.

Effective April 4, 2023, upon completion of the Consumer Health Business Transfer (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies” to the Consolidated Financial Statements included herein) we no longer participate in J&J’s corporate-wide cash management and centralized funding programs.

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Cash Flows

Summarized cash flow information for the fiscal twelve months ended December 31, 2023, January 1, 2023, and January 2, 2022 were as follows:

* Calculation not meaningful.

A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended December 31, 2023 and the fiscal twelve months ended January 1, 2023 is presented below. A detailed discussion of the period-over-period changes in the results for the fiscal twelve months ended January 1, 2023 and the fiscal twelve months ended January 2, 2022 can be found under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our IPO Prospectus.

Operating Activities

Net cash flows from operating activities were $3.2 billion and $2.5 billion for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively, an increase of $643 million. The increase was primarily attributable to changes in working capital balances driven by 1) increased accounts payable and accrued liabilities due to the timing of payments, 2) a decrease in inventory balances compared to the prior year period, resulting from our supply chain optimization initiatives and the rebuilding of inventory levels by customers following supply shortages in the prior year, and 3) a decrease in accounts receivable balances compared to the prior year period, resulting from collection efforts.

Investing Activities

Net cash flows used in investing activities were $488 million and $390 million for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively. Cash used in investing activities in both the fiscal twelve months ended December 31, 2023 and January 1, 2023 was primarily driven by purchases of property, plant, and equipment, partially offset by the proceeds from the sale of assets.

Financing Activities

Net cash flows used in financing activities were $2.5 billion and $1.6 billion for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively. Cash flows used in financing activities for the fiscal twelve months ended December 31, 2023 primarily reflect $13.8 billion in distribution to J&J in connection with the Separation and $0.8 billion in dividends paid, partially offset by $7.7 billion of net proceeds from Senior Notes (as defined below), $4.2 billion of proceeds from the sale of common stock in connection with the Kenvue IPO, and $0.6 billion of net proceeds from the issuance of commercial paper under the Commercial Paper Program (as defined below). In addition, we recognized Net transfers to J&J of $274 million and $1.6 billion for the fiscal twelve months ended December 31, 2023 and January 1, 2023, respectively. Net transfers to J&J were driven by cash pooling and general financing activities, indirect corporate cost allocations from J&J, and taxes deemed to be settled with J&J. For further details regarding Net transfer from (to) J&J, see Note 12, “Relationship with J&J,” to the Consolidated Financial Statements included herein.

Sources of Liquidity

Our primary sources of liquidity are cash on hand, which consisted of cash and cash equivalents of $1.4 billion as of December 31, 2023, cash flows from operations, borrowing capacity under our Revolving Credit Facility of $4.0 billion and authorized Commercial Paper Program issuance of $4.0 billion. As of December 31, 2023, we had no amounts outstanding under the

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Revolving Credit Facility and $599 million of outstanding balances under our Commercial Paper Program, net of related discount of $1 million.

Our ability to fund our operating needs will depend on our ability to continue to generate positive cash flow from operations, and on our ability to obtain debt financing on acceptable terms or to issue additional equity or equity-linked securities. Based upon our history of generating positive cash flows, we believe our existing cash and cash generated from operations will be sufficient to service our current obligations for at least the next 12 months.

Management believes that our cash balances and funds provided by operating activities, along with borrowing capacity and access to capital markets, taken as a whole, provide adequate liquidity to meet all of our current and long-term obligations when due, including third-party debt that we incurred in connection with the Separation, adequate liquidity to fund capital expenditures, and flexibility to meet investment opportunities that may arise. However, we cannot assure you that we will be able to obtain additional debt or equity financing on acceptable terms in the future.

Cash and cash equivalents increased by $151 million during the fiscal twelve months ended December 31, 2023 to $1.4 billion as of December 31, 2023, as compared to $1.2 billion as of January 1, 2023, respectively. Cash and cash equivalents held by our foreign subsidiaries was $1.3 billion and $1.1 billion, respectively, as of December 31, 2023 and January 1, 2023.

Supplier Finance Program

As a part of our ongoing efforts to maximize working capital and managing liquidity, we work with suppliers to optimize payment terms and conditions on accounts payable through a voluntary supply chain financing program. The program provides some of our suppliers with the opportunity to sell receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. We are not a party to the arrangements between the suppliers and the third-party financial institutions. Our obligations to the suppliers, including amounts due, and scheduled payment dates, are not affected by a participating supplier’s decision to participate in the program. See Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein.

Senior Notes

On March 22, 2023, we issued eight series of senior unsecured notes (the “Senior Notes”) in an aggregate principal amount of $7.75 billion. The net proceeds to us from the Senior Notes offering was $7.7 billion after deductions of discounts and issuance costs of $77 million. The net proceeds were reflected as Restricted cash on the Consolidated Balance Sheets prior to their release from escrow on April 5, 2023. Upon release from escrow, these funds were loaned to J&J through the Facility Agreement dated April 5, 2023. For further details on the Senior Notes and Facility Agreement, see Note 5. “Borrowings,” to the Consolidated Financial Statements included herein. The unamortized discounts and debt issuance costs related to the Senior Notes as of December 31, 2023 were approximately $72 million. The interest payments are due on March 22 and September 22 of each year, and commenced on September 22, 2023.

Our Senior Notes are governed by an indenture and supplemental indenture between us and a trustee (collectively, the “indenture”). The indenture contains certain covenants, including limitations on us and certain of our subsidiaries’ ability to incur liens or engage in sale-leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which, the Senior Notes may be declared immediately due and payable.

Commercial Paper Program

On March 3, 2023, we entered into a commercial paper program (the “Commercial Paper Program”). Our Board has authorized the issuance of up to $4.0 billion in an aggregate principal amount of commercial paper under the Commercial Paper Program. Any such issuance will mature within 364 days from date of issue. The Commercial Paper Program contains representations and warranties, covenants and default that are customary for this type of financing. The commercial paper notes issued under the Commercial Paper Program are unsecured notes ranking at least pari passu with all of our other senior unsecured indebtedness.

Prior to the Kenvue IPO, we issued $1.25 billion under the Commercial Paper Program which, collectively with the Senior Notes as further described above, are referred to as the “Debt Financing Transactions.”

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Revolving Credit Facility

On March 6, 2023, we entered into a credit agreement providing for a five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $4.0 billion to be made available in U.S. dollars and Euros.

Facility Agreement

On April 5, 2023, we entered into the Facility Agreement, allowing us to lend the proceeds from the issuance of debt (including commercial paper) in an aggregate amount of $8.9 billion to J&J. Interest on loans made from the Facility Agreement was charged at an interest rate equal to the Secured Overnight Financing Rate (“SOFR”) less an adjusted margin of 15 basis points, with a floor of 0% (a weighted average interest rate of 4.7%) to be paid monthly in arrears. We recognized interest income of $33 million in the fiscal twelve months ended December 31, 2023 in relation to the Facility Agreement.

Upon completion of the Kenvue IPO on May 8, 2023, the Facility Agreement was terminated and the balance of the Facility Agreement, and all accrued interest, were repaid by J&J, for a total cash inflow of $9.0 billion. We remitted this cash back to J&J as a part of the distribution to J&J in connection with the Separation.

Interest Expense, Net

We recognized interest expense of $358 million for the fiscal twelve months ended December 31, 2023 and interest income of $108 million for the fiscal twelve months ended December 31, 2023. The net amount was included in Interest expense, net in the Consolidated Statements of Operations.

Compliance with Covenants

As of December 31, 2023, we were in compliance with all debt covenants, and no default or event of default has occurred.

Distribution to J&J

On May 8, 2023, in conjunction with the Consumer Health Business Transfer, we distributed $13.8 billion to J&J from the 1) net proceeds received from the sale of the common stock in the Kenvue IPO, 2) net proceeds received from the Debt Financing Transactions as defined in Note 5, “Borrowings,” of the Consolidated Financial Statements included herein, and 3) any cash and cash equivalents in excess of the $1.17 billion in cash and cash equivalents retained by Kenvue immediately following the Kenvue IPO.

Future Cash Requirements

We expect our future cash requirements will relate to working capital, capital expenditures, restructuring and integration, compensation and benefit related obligations, interest expense and debt service obligations, litigation costs, the return of capital to shareholders, including through the payment of any dividend and other contractual obligations that arise in the normal course of business. We may also use cash to enter into business development transactions, such as licensing arrangements or strategic acquisitions.

As of December 31, 2023, we expect our primary cash requirements for 2024 to include capital expenditures. We have made payments of $469 million for property, plant, and equipment for the fiscal twelve months ended December 31, 2023.

Kenvue’s Board has authorized a share repurchase program, under which we are authorized to repurchase up to 27 million shares of our outstanding common stock in open market or privately negotiated transactions. The program has no expiration date and may be suspended or discontinued at any time. The intent of this repurchase program is to offset dilution from the vesting or exercise of equity awards under Kenvue’s equity incentive plan. We repurchased 350,000 shares of our outstanding common stock for $7 million during the fiscal twelve months ended December 31, 2023.

Contractual Obligations

We are party to contractual obligations involving commitments to make payments to third parties, which impact our short-term and long-term liquidity and capital resource needs. Our contractual cash obligations include required payments of long-term

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debt principal and interest, purchase obligations, expected obligations under our pension plans, operating lease payments, and tax-related obligations. Our material cash requirements include the following contractual and other obligations:

•Debt Obligations and Interest Payments—See Note 5, “Borrowings,” to the Consolidated Financial Statements included herein for additional information on our debt and the timing of expected future principal and interest payments.

•Purchase Obligations—As of December 31, 2023, we had purchase obligations of approximately $0.5 billion in connection with suppliers for the purchases of raw materials, packaging, other materials, and finished goods in the normal course of business, which are payable within 12 months.

•Pensions—It is our objective to contribute to the pension plans to ensure adequate funds are available to make benefit payments to plan participants and beneficiaries when required. See Note 7, “Pensions,” to the Consolidated Financial Statements included herein for additional information on our pensions and the timing of expected future payments related to projected benefit plan contributions.

•Operating Leases—See Note 8, “Leases,” to the Consolidated Financial Statements included herein for additional information on our operating leases and the timing of expected future payments.

See Note 14, “Income Taxes,” to the Consolidated Financial Statements included herein for additional information on our tax-related obligations.

Future Litigation

In the ordinary course of business, we are involved in litigation, claims, government inquiries, investigations, charges, and proceedings. See Note 17, “Commitments and Contingencies,” to the Consolidated Financial Statements included herein for further details regarding certain matters that are currently pending. Our ability to successfully resolve pending and future litigation may adversely impact our financial condition, results of operations, or cash flows.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements (as defined under the rules and regulations of the SEC) or any relationships with unconsolidated entities that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, net sales or expenses, results of operations, liquidity, cash requirements, or capital resources.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those policies and estimates made in accordance with generally accepted accounting principles that are most important and material to the preparation of the consolidated financial statements and which require management’s most subjective and complex judgments due to the need to select policies from among alternatives available and to make estimates about matters that are inherently uncertain. We base our estimates on historical experience and other factors that we believe to be reasonable under the circumstances. On an ongoing basis, we review our estimates to ensure that these estimates appropriately reflect changes in our business and new information as it becomes available. If historical experience and other factors we use to make these estimates do not reasonably reflect future activity, our business, results of operations, or financial condition could be adversely affected.

Revenue Recognition

Our revenue contracts represent a single performance obligation to sell our products to customers. Revenue from the sale of products to customers is recognized at a single point in time when ownership, risks, and rewards transfer, which can be on the date of shipment or the date of receipt by the customer depending on the terms of the contract. Net sales exclude taxes collected by us on behalf of governmental authorities and include the shipping and handling fees charged to customers.

The nature of our business gives rise to several types of variable consideration including trade promotions, comprised of coupons, product listing allowances, cooperative advertising arrangements, volume-based incentive programs, as well as discounts to customers, rebates, sales incentives, and product returns, which are estimated at the time of the sale using the “expected value” method or the “most likely amount” method based on the form of variable consideration. Trade promotions, discounts to customers, rebates, and sales incentives are issued to customers at the point of sale and are estimated based on contractual terms, historical experience, trend analysis, and projected market conditions in the various markets served. Revenue is recognized net of provisions for discounts and trade promotions. The potential of estimates to vary differs by product,

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customer type, and geographic location. Historically, adjustments to these estimates to reflect updated expectations or actual results have not been material to our overall business.

See Note 19, “Segments of Business and Geographic Areas,” to the Consolidated Financial Statements included herein for further disaggregation of net sales and Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein for further information regarding revenue recognition.

Income Taxes

Prior to the Kenvue IPO, the Company’s operations were calculated on a carve-out basis and included certain hypothetical foreign tax credit benefits. Following the Kenvue IPO, these hypothetical foreign tax credit benefits are not available for future utilization by the Company and were removed from the tax provision. Furthermore, the Company operated as part of J&J until the completion of the Exchange Offer on August 23, 2023, and therefore the Company will be included in J&J’s U.S. Federal consolidated income tax return until that date. The Company will then file a standalone U.S. Federal consolidated income tax return for the remainder of the fiscal year 2023. The Company expects to file income tax returns on a standalone basis in most other jurisdictions in which it operates for the fiscal year 2023. Certain current income tax liabilities related to our activities included in J&J’s income tax returns were assumed to be immediately settled with J&J through the Net Parent investment or Additional Paid-In Capital accounts on the Consolidated Balance Sheets and reflected in the Consolidated Statements of Cash Flows as a financing activity. Following the Exchange Offer, our operating footprint as well as tax return elections and assertions are expected to be different and therefore, our income taxes as presented in the Consolidated Financial Statements may differ in future periods.

Income taxes are recorded based on amounts refundable or payable for the current year and include the results of any differences between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. We estimate deferred tax assets and liabilities based on enacted tax regulations and rates. Future changes in tax laws and rates may affect recorded deferred tax assets and liabilities.

U.S. Federal, state, and foreign income tax payables and receivables are recognized on the Consolidated Balance Sheets for entities that file separate income tax returns and make direct payments to taxing authorities. Prior to the Kenvue IPO, U.S. federal, state and foreign income tax payables and receivables for entities that were included in the filing of a combined, consolidated or group income tax return with J&J were deemed settled with J&J and were included in the “Net Investment from J&J.”

Management establishes valuation allowances on deferred tax assets when it is determined to be “more likely than not” that some portion or all of the deferred tax assets may not be realized. Management considers positive and negative evidence in evaluating our ability to realize our deferred tax assets, including our historical results, forecasts of future ability to realize our deferred tax assets, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis.

We have unrecognized tax benefits for uncertain tax positions. We follow U.S. GAAP, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The estimates for these positions are regularly assessed based upon all available information. These estimates may be revised in the future and such changes may result in a material additional expense or benefit to our financial results or our effective tax rate.

In the United States, the Tax Cuts and Jobs Act of 2017 (“TCJA”) includes provisions for GILTI. GILTI is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets, as provided by the TCJA. In January 2018, the Financial Accounting Standards Board issued guidance that allowed companies to elect as an accounting policy whether to record the tax effects of GILTI in the period the tax liability is generated (i.e., “period cost”) or to provide for deferred tax assets and liabilities related to basis differences that exist at the balance sheet date and are expected to affect the amount of GILTI inclusion in future years upon reversal (i.e., “deferred method”). The Company previously followed J&J’s accounting policy to consider the deferred tax effects of GILTI. Effective in the third quarter of fiscal year 2023, the Company changed the accounting principle for GILTI from the deferred approach to the period cost approach. See Note 1, “Description of the Company and Summary of Significant Accounting Policies.”

We entered into a tax matters agreement with J&J in connection with the Separation. For more information on the Tax Matters Agreement, see Note 12, “Relationship with J&J,” and in our Proxy Statement.

See Note 1, “Description of the Company and Summary of Significant Accounting Policies,” and Note 14, “Income Taxes,” to the Consolidated Financial Statements included herein for further information regarding income taxes.

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See Note 14, “Income Taxes,” for the Company’s analysis on material changes in tax law.

Goodwill and Intangible Assets

We assess goodwill and intangible assets with indefinite lives at least annually for impairment, or more frequently if impairment indicators exist. Factors considered for the annual impairment test or if indicators of impairment exist include:

•macroeconomic industry and market conditions;

•a significant adverse shift in the operating environment or the manner in which an asset is used; or

•pending litigation.

Intangible assets that have finite useful lives continue to be amortized over their useful lives and are reviewed for impairment if impairment indicators exist. Our evaluation is based on an assessment of potential indicators of impairment, such as:

•an adverse change in legal factors or in the business climate that could affect the value of an asset;

•an adverse change in the extent or manner in which an asset is used or is expected to be used; or

•current or forecasted reductions in net sales, operating income, or cash flows associated with the use of an asset.

During the fiscal twelve months ended January 1, 2023, we reallocated goodwill to align with the new operating segments determined in 2022: 1) Self Care, 2) Skin Health and Beauty, and 3) Essential Health, which are also our reporting units. As a result of this realignment, goodwill was reassigned to each of the reporting units using a relative fair value approach. We estimate the fair values of a reporting unit using a discounted cash flow model. Following the change in reporting units during the fiscal twelve months ended January 1, 2023, the Company performed a quantitative impairment test on each of the reporting units. After completing the testing, the fair value of each of these reporting units exceeded its carrying value, and, therefore, there was no impairment to goodwill.

We completed our annual goodwill impairment analysis during the fourth quarter of fiscal year 2023 by performing a quantitative assessment on each of the reporting units and concluded that no impairment to goodwill was necessary as the fair value of each reporting unit was in excess of its respective carrying value.

We did not recognize an intangible asset impairment during the fiscal twelve months ended December 31, 2023 and January 2, 2022. During the fiscal twelve months ended January 1, 2023, we recognized an intangible impairment of $12 million related to certain definite-lived trademarks deemed as irrecoverable in Other operating (income) expense, net in the Consolidated Statements of Operations.

See Note 1, “Description of the Company and Summary of Significant Accounting Policies,” and Note 4, “Intangible Assets and Goodwill,” to the Consolidated Financial Statements included herein for further information regarding goodwill and intangible assets.

Stock-Based Compensation

The Company recognizes compensation costs related to equity awards granted ratably over the requisite service period, which is the vesting period of the award, based on the estimated fair value of the awards on the grant date.

The estimated fair value of stock options is determined using the Black-Scholes option valuation model. The inputs used in determining the fair value are the expected volatility, expected dividend yield, risk-free rate, and expected term.

The fair value of restricted stock units (“RSUs”) is determined based on the fair value of the Company’s common stock on the grant date.

The Company’s performance stock units (“PSUs”) have a singular market condition, which is described below. The estimated fair value of PSUs is determined using the Monte Carlo valuation model. The inputs used in determining the fair value are the length of the performance period, the risk-free rate, and the stock prices, correlations, and expected volatility of the Company and the firm in the selected peer group.

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The payout of PSU awards is assessed by comparing the Company’s TSR during a certain three-year period to the respective TSR of companies in a selected performance peer group. Given the requirement to meet certain defined market criteria, the recipient of a PSU may earn a total payout ranging from 0% to 200% of the target award.

For all equity awards, the original estimate of the grant date fair value is not subsequently revised unless the awards are modified. The Company accounts for forfeitures during the period in which they occur.

See Note 11, “Stock-Based Compensation,” to the Consolidated Financial Statements included herein for more information on equity awards granted by Kenvue.

Recently Issued Accounting Standards

See Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein for a description of recently issued accounting standards not yet adopted and their anticipated impact to the Consolidated Financial Statements.

Other Information

Baby Powder Transition

On August 11, 2022, we announced the commercial decision to transition to an all cornstarch-based baby powder portfolio. As a result of this transition, talc-based Johnson’s® Baby Powder was discontinued globally in 2023. Talc-based Johnson’s® Baby Powder was previously discontinued during 2020 in certain markets including the United States and Canada. We do not expect the impact of this change to have a significant impact on our results of operations.

Deferred Markets

In order to ensure compliance with applicable law, to obtain necessary governmental approvals and other consents and for other business reasons, we deferred the transfer of certain assets and liabilities of businesses in certain non-U.S. jurisdictions, including China, Malaysia, and Russia, until after the completion of the Kenvue IPO. On September 11, 2023, J&J transferred the equity interests in the majority of the Deferred Legal Entities (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein) to the Company that previously had been consolidated as Variable Interest Entities (“VIEs”) in the Company’s Consolidated Financial Statements. The Consolidated Financial Statements included herein include businesses in all jurisdictions in which we will operate following the completion of the Separation, including any Deferred Local Business (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein). For more information regarding Deferred Local Businesses, see “Risk Factors—Risks Related to Our Relationship with J&J—The transfer of certain assets and liabilities from J&J to us contemplated by the Separation has not been completed and may be significantly delayed or not occur at all” and Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included herein.